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Genoptix, Inc. DEF 14A 2009

Documents found in this filing:

  1. Def 14A
  2. Graphic
  3. Graphic
  4. Graphic
Definitive Proxy Statement

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant x                            Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to § 240.14a-12

GENOPTIX, INC.

(Name of Registrant as Specified In Its Charter)

  

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  1. Title of each class of securities to which transaction applies:

  

 
  2. Aggregate number of securities to which transaction applies:

  

 
  3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

  

 
  4. Proposed maximum aggregate value of transaction:

  

 
  5. Total fee paid:

  

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  6. Amount Previously Paid:

  

 
  7. Form, Schedule or Registration Statement No.:

  

 
  8. Filing Party:

  

 
  9. Date Filed:

  

 


LOGO

GENOPTIX, INC.

1811 Aston Avenue

Carlsbad, CA 92008

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 2, 2009

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of Genoptix, Inc., a Delaware corporation. The meeting will be held at 9:00 a.m. local time on Tuesday, June 2, 2009 at the company’s facility located at 2110 Rutherford Road, Carlsbad, CA 92008 for the following purposes:

 

1. To elect Laurence R. McCarthy, Ph.D. and Christine A. White, M.D. as Class II directors to hold office until the 2012 Annual Meeting of Stockholders.

 

2. To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2009.

 

3. To conduct any other business properly brought before the meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The record date for the Annual Meeting is April 9, 2009. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

 

By Order of the Board of Directors
LOGO
Christian V. Kuhlen, M.D., Esq.
Corporate Secretary

Carlsbad, California

April 21, 2009

 

 

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please vote over the internet or by telephone as instructed in these materials, or complete, date, sign and return the proxy mailed to you if you received a proxy card by mail, as promptly as possible in order to ensure your representation at the meeting. If you received a paper copy of the proxy card by mail, a return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 


GENOPTIX, INC.

1811 Aston Avenue

Carlsbad, CA 92008

PROXY STATEMENT

FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 2, 2009

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why did I receive a notice regarding the availability of proxy materials on the internet?

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.

We intend to mail the Notice on or about April 21, 2009 to all stockholders of record entitled to vote at the annual meeting.

Will I receive any other proxy materials by mail?

We may send you a proxy card, along with a second Notice, on or after May 2, 2009.

Who can vote at the annual meeting?

Only stockholders of record at the close of business on April 9, 2009 will be entitled to vote at the annual meeting. On this record date, there were 16,830,821 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If at the close of business on the record date your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the proxy card that may be sent to you or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If at the close of business on the record date your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.

What am I voting on?

There are two matters scheduled for a vote:

 

   

Election of Laurence R. McCarthy, Ph.D. and Christine A. White, M.D. as Class II directors to hold office until the 2012 Annual Meeting of Stockholders; and

 

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Ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2009.

What if another matter is properly brought before the meeting?

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.

How do I vote?

You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting. The procedures for voting are fairly simple:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the annual meeting. Alternatively, you may vote by proxy through the internet or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person even if you have already voted by proxy.

 

   

To vote in person, come to the annual meeting and we will give you a ballot when you arrive.

 

   

To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct. If you received a Notice and would like to request a proxy card by mail, please follow the instructions contained in the Notice.

 

   

To vote over the telephone, dial toll-free 1-800-690-6903 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the Notice. Your vote must be received by 11:59 p.m. Eastern Time on June 1, 2009 to be counted.

 

   

To vote through the internet, go to http://www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number from the Notice. Your vote must be received by 11:59 p.m. Eastern Time on June 1, 2009 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a Notice containing voting instructions from that organization rather than from us. Simply follow the voting instructions in the Notice to ensure that your vote is counted. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

 

 

We provide internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

 

How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you own as of the close of business on April 9, 2009, the record date for the annual meeting.

 

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What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of both nominees for director, and “For” the ratification of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2009. If any other matter is properly presented at the meeting, one of the individuals named on your proxy card as your proxy will vote your shares using his or her best judgment.

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies, but D.F. King & Co., Inc. will be paid its customary fee of approximately $7,500 plus out-of-pocket expenses if it solicits proxies. We will also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What does it mean if I receive more than one Notice?

If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the Notices to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

   

You may submit another properly completed proxy card with a later date.

 

   

You may grant a subsequent proxy by telephone or through the internet.

 

   

You may send a timely written notice that you are revoking your proxy to our Corporate Secretary at 1811 Aston Avenue, Carlsbad, CA 92008.

 

   

You may attend the annual meeting and vote in person (however, simply attending the meeting will not, by itself, revoke your proxy).

Your most current proxy card or telephone or internet proxy is the one that is counted.

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

When are stockholder proposals due for next year’s annual meeting?

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by December 22, 2009, to our Corporate Secretary at 1811 Aston Avenue, Carlsbad, CA 92008. If you wish to submit a proposal that is not to be included in next year’s proxy materials or nominate a director, your proposal or nomination generally must be submitted in writing to the same address no later than March 4, 2010 and no earlier than February 2, 2010. You are also advised to review the Company’s Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “For” and “Withhold” and, with respect to proposals other than the election of directors, “Against” votes,

 

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abstentions and broker non-votes. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as “Against” votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

What are “broker non-votes”?

Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the New York Stock Exchange (“NYSE”), “non-routine” matters are generally those involving a contest or a matter that may substantially affect the rights or privileges of stockholders, such as mergers or stockholder proposals.

How many votes are needed to approve each proposal?

 

   

For the election of directors, the two nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome.

 

   

To be approved, the ratification of the selection of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2009 must receive “For” votes from the holders of a majority of shares present and entitled to vote either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the outstanding shares entitled to vote as of the close of business on the record date are represented by stockholders present at the meeting or represented by proxy. On the record date, there were 16,830,821 shares outstanding and entitled to vote. Therefore, in order for a quorum to exist, 8,415,411 shares must be represented by stockholders at the meeting or by proxy.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the chairman of the meeting or the holders of a majority of shares present at the meeting in person or represented by proxy may adjourn the meeting to another date.

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. Final voting results will be published in our quarterly report on Form 10-Q for the second quarter of 2009.

 

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PROPOSAL 1

ELECTION OF DIRECTORS

Our Board of Directors currently consists of eight members and is divided into three classes, each of which has a three-year term. Class I currently consists of three directors, Class II consists of two directors and Class III consists of three directors. The Class II directors are to be elected at the annual meeting to serve until our 2012 Annual Meeting of Stockholders and until their successors are duly elected and qualified, or until their death, resignation or removal. The terms of the directors in Classes I and III expire at our 2011 and 2010 Annual Meetings of Stockholders, respectively. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is elected and qualified.

The two nominees for Class II directors are Laurence R. McCarthy, Ph.D. and Christine A. White, M.D. Dr. McCarthy and Dr. White are currently Class II directors of Genoptix and were elected previously by the Board to fill existing vacancies. Dr. McCarthy was recommended to our Nominating and Corporate Governance Committee as a candidate for director by Robert Curry, Ph.D., a non-management director. Dr. White was recommended to our Nominating and Corporate Governance Committee as a candidate for director by Tina S. Nova, Ph.D., our President, CEO and a director. The candidates were identified for their extensive diagnostic and oncology industry experience.

Directors are elected by a plurality of the votes present at the meeting or by proxy and entitled to vote at the meeting. The two nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. If no contrary indication is made, shares represented by executed proxies will be voted “For” the election of the two nominees named above or, if either nominee becomes unavailable for election as a result of an unexpected occurrence, “For” the election of a substitute nominee designated by our Board of Directors. Each nominee has agreed to serve as a director if elected, and we have no reason to believe that any nominee will be unable to serve.

We encourage all of our directors and nominees for director to attend our annual meeting of stockholders. Our 2008 Annual Meeting of Stockholders was attended by all of our directors that were then serving on our Board of Directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE.

The following is biographical information as of March 31, 2009 for each nominee for Class II director and each person whose term of office as a Class I or III director will continue after the annual meeting.

 

Name

   Age   

Position

Timothy M. Buono

   43    Director

Robert E. Curry, Ph.D.  

   62    Director

Karin Eastham

   59    Director

Michael A. Henos

   59    Director

Laurence R. McCarthy, Ph.D.  

   64    Director

Tina S. Nova, Ph.D.  

   55    President and Chief Executive Officer and Director

Andrew E. Senyei, M.D.  

   59    Director and Chairman of the Board

Christine A. White, M.D.  

   57    Director

Nominees for Election for a Three-year Term Expiring at the 2012 Annual Meeting

Laurence R. McCarthy, Ph.D. has served on our Board of Directors since August 2008. Dr. McCarthy has served as a Venture Partner with Ampersand Ventures, a private equity fund focused on healthcare investment,

 

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since 2007 and President of Scientific Technologies and Solutions, LLC, a diagnostic and technology consulting company, since 2007. From 1987 to 2006 Dr. McCarthy was President, CEO, Chairman and CTO of Focus Diagnostics and later served as its CTO following the company’s acquisition by Quest Diagnostics in 2006. Prior to this, Dr. McCarthy was President for the U.S. Diagnostics Division of Boehringer Mannheim; Vice President and General Manager and Vice President R&D for Becton Dickinson & Co. Dr. McCarthy’s academic experience includes faculty positions at Johns Hopkins School of Medicine, University of North Carolina School of Medicine, and Cornell University School of Medicine, as well as serving as a Laboratory Director at the Memorial Sloan-Kettering Cancer Center and at the North Carolina Memorial Hospital. Dr. McCarthy received his Ph.D. in Microbiology from the University of New Hampshire and his B.S. in Biology from St. Anselm College.

Christine A. White, M.D., has served as a member of our Board of Directors since January 2009. Dr. White was with Biogen Idec Inc., a biopharmaceutical company, from 1996 to 2005, where she held several senior positions, most recently as Senior Vice President, Global Medical Affairs. From 1994 to 1996, Dr. White served as the Director of Clinical Oncology Research at the Sidney Kimmel Cancer Center in San Diego and, from 1984 to 1994, Dr. White was on the clinical staff and held various positions in the Department of Medicine at Scripps Memorial Hospitals in La Jolla and Encinitas, California, most recently as Chairman, Department of Medicine. Dr. White serves as a member of the board of directors at Arena Pharmaceuticals, Inc. and Monogram Biosciences, Inc. Dr. White holds a B.A. in Biology and an M.D. from the University of Chicago and is Board certified in both Internal Medicine and Medical Oncology.

The Board of Directors’ recommends a vote in favor of each named nominee.

Directors Continuing in Office Until the 2010 Annual Meeting

Timothy M. Buono has served on our Board of Directors since March 2000. Since 2008, Mr. Buono has been a founder and member of Aura Equity Partners, LLC, a private equity firm focused on growth oriented investments in companies with consumer driven health and personal care markets. From 1997 until 2008, Mr. Buono served as a vice-president of Tullis-Dickerson & Co., Inc., a healthcare focused venture capital firm, and a partner in the general partner entities of its sponsored venture capital funds. From 1994 to 1997, he served as senior vice president, business development, for Health Partners, Inc., a healthcare services company. From 1993 to 1994, Mr. Buono served as director, business development, for Occupational Health Resources, Inc., a healthcare services company. From 1990 to 1993, Mr. Buono served as an associate of Tullis-Dickerson & Co., Inc. From 1988 to 1990, Mr. Buono was a financial and operations analyst for Shaffer-Clarke. Mr. Buono is a director of a number of privately-held companies. He received his B.A. in Economics from Connecticut College in 1988, and completed an Executive Program at Columbia University’s Graduate School of Business in 2003.

Robert E. Curry, Ph.D. has served on our Board of Directors since February 2002. Since July 2002, Dr. Curry has served as a venture partner at Alliance Technology Ventures, L.P., based in Atlanta, Georgia. From July 2001 to July 2002, Dr. Curry was engaged as a consultant to DLJ Capital Corporation, a wholly-owned subsidiary of Credit Suisse First Boston (USA), Inc., or CSFB. He joined the Sprout Group, or Sprout, a submanager of various venture capital funds within the CSFB organization, as a general partner in May 1991. Prior to joining Sprout, Dr. Curry served in various capacities with Merrill Lynch R&D Management and Merrill Lynch Venture Capital from 1984, including as president of both organizations from January 1990 to May 1991. Previously, Dr. Curry was a vice president of Becton, Dickinson and Company, a pharmaceutical company, from May 1980 to July 1984, and General Manager of the Diagnostics Systems Division of Bio-Rad Laboratories Inc., a clinical diagnostic and life sciences research company, from August 1976 to May 1980. He currently is a director of numerous privately-held companies as well as the chairman of the board and a trustee of Keck Graduate Institute, a not-for-profit organization. He is also currently the acting chief executive officer of SensysMedical, Inc. Dr. Curry received a B.S. from the University of Illinois, and a M.S. and Ph.D. in chemistry from Purdue University.

 

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Andrew E. Senyei, M.D. has served on our Board of Directors as chairman of the board since April 2000. Dr. Senyei has been a managing director and a general partner of Enterprise Partners, a venture capital firm, since 1987. Dr. Senyei was a founder of Molecular Biosystems and, prior to joining Enterprise Partners, was a practicing clinician and adjunct associate professor of obstetrics, gynecology and pediatrics at the University of California, Irvine. He serves on the boards of directors of numerous private healthcare companies. Dr. Senyei obtained his M.D. from Northwestern University and residency training at the University of California, Irvine, Medical Center.

Directors Continuing in Office Until the 2011 Annual Meeting

Karin Eastham has served on our Board of Directors since August 2008. From May 2004 to September 2008 she served as Executive Vice President and Chief Operating Officer and as a member of the Board of Trustees of Burnham Institute for Medical Research, a non-profit corporation engaged in biomedical research. From April 1999 to May 2004, Ms. Eastham served as Senior Vice President, Finance, Chief Financial Officer and Secretary of Diversa Corporation. She previously held similar positions with CombiChem, Inc., a computational chemistry company, and Cytel Corporation, a biopharmaceutical company. Ms. Eastham also held several positions, including Vice President, Finance, at Boehringer Mannheim Corporation, from 1976 to 1988. Ms. Eastham also serves as a director for Amylin, Inc. and Illumina, Inc. She received a B.S. and an M.B.A. from Indiana University. She is a Certified Public Accountant and a Certified Director.

Michael A. Henos has served on our Board of Directors since 2001. From 1993 to the present, Mr. Henos has served as managing general partner of Alliance Technology Ventures, L.P., based in Atlanta, Georgia. Mr. Henos served as a general partner of Aspen Ventures, an early stage venture capital partnership, from 1991 to 2001. Mr. Henos previously served as a vice president of 3i Ventures Corporation, the predecessor of Aspen Ventures, from 1986 to 1991. From 1984 to 1986, Mr. Henos served as a healthcare consultant with Ernst & Young, specializing in venture financing of startup medical technology companies. Before joining Ernst & Young, Mr. Henos served in a variety of operating management positions and co-founded and served as chief executive officer of ProMed Technologies, Inc. Mr. Henos is the chairman of the board of directors of both Inhibitex, Inc., a publicly held clinical stage biopharmaceutical company, and AtheroGenics, Inc., a publicly held biopharmaceutical company. Mr. Henos received his B.S. and MBA from the University of California, Los Angeles.

Tina S. Nova, Ph.D. has served as our president and chief executive officer, and a member of our Board of Directors, since March 2000. From 1994 to January 2000, Dr. Nova served as chief operating officer and president of Nanogen, Inc., a provider of molecular diagnostic tests, where she was a co-founder. From 1992 to 1994, Dr. Nova served as chief operating officer of Selective Genetics, a targeted therapy biotechnology company. She currently serves as a member of the board of directors of Arena Pharmaceuticals, Inc. and Cypress Bioscience, Inc., both publicly held clinical-stage biopharmaceutical companies. She also serves on the board of trustees of the University of San Diego and was a life science sector representative to the Independent Citizen’s Oversight Committee overseeing the California Stem Cell Initiative (Proposition 71) from inception through 2008. Dr. Nova holds a B.S. degree in biological sciences from the University of California, Irvine and a Ph.D. in biochemistry from the University of California, Riverside.

 

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Executive Officers

The following is biographical information as of March 31, 2009 for our executive officers other than Dr. Nova, whose biographical information is included above.

 

Name

   Age   

Position

Samuel D. Riccitelli

   50    Executive Vice President and Chief Operating Officer

Douglas A. Schuling

   48    Executive Vice President and Chief Financial Officer

Christian V. Kuhlen, M.D., Esq.  

   36    Vice President, General Counsel and Corporate Secretary

Samuel D. Riccitelli has served as our executive vice president and chief operating officer since October 2001. From 1995 to 2001, Mr. Riccitelli served in a number of positions for Becton, Dickinson and Company, a global medical technology company, including most recently as vice president & general manager and as a board member for BD Ventures, L.L.C., a venture capital fund. From 1989 to 1994, he served in a number of positions for the FOxS Division of Puritan-Bennett Corporation, a medical device company, including most recently as general manager. Mr. Riccitelli holds a B.A. in biology from Washington and Jefferson College and a M.S. Eng. degree in mechanical & biomedical engineering from The University of Texas.

Douglas A. Schuling has served as our senior vice president and chief financial officer since April 1999. From 1997 to March 1999, Mr. Schuling held the position of chief financial and operating officer for Point-of-Care Systems, a venture capital backed clinical information systems company. From 1985 to 1997, Mr. Schuling held various positions at Nellcor Puritan Bennett, a research, development and manufacturing company, specializing in medical equipment and supplies, most recently as Hospital Group Controller. Mr. Schuling received his B.S. degree in accounting from Drake University.

Christian V. Kuhlen, M.D., Esq. has served as our vice president, general counsel and corporate secretary since September 2007. Prior to joining Genoptix, Dr. Kuhlen was an attorney with Cooley Godward Kronish LLP from October 2004 to September 2007. Between August 1997 and May 2004, Dr. Kuhlen was a full-time graduate student. From October 1995 to July 1997, Dr. Kuhlen was a research assistant at The Scripps Research Institute in La Jolla, California, where he studied the pathogenesis of the hepatitis B and hepatitis C viruses. He holds a B.S. in biochemistry and cell biology and a B.A. in economics from the University of California, San Diego and a J.D. and M.D. from the University of Southern California.

 

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Independence of the Board of Directors and its Committees

As required under The NASDAQ Stock Market, or NASDAQ, listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board. Our Board of Directors consults with our counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in applicable listing standards of the NASDAQ, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and Genoptix, our senior management and our independent auditors, our Board of Directors has affirmatively determined that the following seven directors are independent directors within the meaning of the applicable NASDAQ listing standards: Mr. Buono, Dr. Curry, Ms. Eastham, Mr. Henos, Dr. McCarthy, Dr. Senyei, and Dr. White. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with us. Dr. Nova, our President and Chief Executive Officer, is not an independent director by virtue of her employment with us.

As required under applicable NASDAQ listing standards, our independent directors met three times during fiscal 2008 in regularly scheduled executive sessions at which only independent directors were present. The Chairman of the Board has typically presided over these executive sessions. All of the committees of our Board of Directors are comprised entirely of directors determined by the Board to be independent within the meaning of the applicable Securities and Exchange Commission, or SEC, and NASDAQ listing standards (including in the case of the Audit Committee Rules 4350(d)(2)(A)(i) and (ii) of the NASDAQ listing standards) and free of any relationship that would impair his or her individual exercise of independent judgment with regard to Genoptix. In addition, all of the members of the Compensation Committee are independent as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

Meetings of the Board of Directors

The Board of Directors met six times during fiscal 2008. Each Board member attended 75% or more of the aggregate of the meetings of the Board and of the committees on which he or she served, held during the period for which he or she was a director or committee member, respectively.

 

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Information Regarding the Board of Directors and its Committees

Our Board of Directors has four committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Compliance Committee. The following is current membership information and membership and meeting information for each of these committees during the year ended December 31, 2008.

 

Name

   Audit
Committee
    Compensation
Committee
    Compliance
Committee
    Nominating
and Corporate
Governance
Committee
 

Timothy M. Buono

   X *     X    

Robert E. Curry, Ph.D. (1)

   X       X *  

Karin Eastham (2)

   X         X  

Michael A. Henos

     X *    

Arda M. Minocherhomjee, Ph.D. (3)

     X     X

Laurence R. McCarthy, Ph.D. (4)

       X    

Andrew E. Senyei, M.D.

     X       X *

Stephen L. Spotts (5)

       X  

Thomas A. Waltz, M.D. (6)

   X       X

Christine A. White, M.D. (7)

     X       X  

Total meetings in fiscal 2008

   4     7     4     3  

 

 * Committee Chairperson
 † Former committee member
(1) Dr. Curry resigned from the Audit Committee in November 2008, and was subsequently reappointed to the Audit Committee in January 2009.
(2) Ms. Eastham was appointed to the Audit Committee in July 2008 and was appointed to the Nominating and Corporate Governance Committee in January 2009.
(3) Dr. Minocherhomjee resigned as a director and a member of the Compensation Committee and the Nominating and Corporate Governance Committee in January 2009.
(4) Dr. McCarthy was appointed to the Compliance Committee in July 2008.
(5) Mr. Spotts elected not to stand for re-election at the 2008 annual meeting. His term as a director and member of the Compliance Committee ended in June 2008.
(6) Dr. Waltz passed away in December 2008.
(7) Dr. White was appointed to the Compensation Committee and the Nominating and Corporate Governance Committee in January 2009.

Below is a description of each committee of the Board of Directors and its functions. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities.

Audit Committee

The Audit Committee operates pursuant to a written charter that is available on our website at http://investor.genoptix.com. The Audit Committee consists of Timothy M. Buono, Robert E. Curry, Ph.D. and Karin Eastham, with Mr. Buono serving as the Chair of the Audit Committee. The Audit Committee met four times during fiscal 2008. The functions of the Audit Committee include, among other things:

 

   

evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;

 

   

reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

 

   

monitoring the rotation of partners of our independent auditors on our engagement team as required by law;

 

10


   

reviewing our annual and quarterly consolidated financial statements and reports and discussing the statements and reports with our independent auditors and management;

 

   

reviewing with our independent auditors and management significant issues that arise regarding accounting principles and consolidated financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls;

 

   

reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;

 

   

establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters and other matters;

 

   

preparing the report that the SEC requires in our annual proxy statement;

 

   

reviewing and providing oversight with respect to any related party transactions;

 

   

reviewing reports from management, our auditors and our Compliance Committee regarding our procedures to monitor and ensure compliance with our legal and regulatory responsibilities, our code of business conduct and ethics and our compliance with legal and regulatory requirements;

 

   

reviewing our investment policy on a periodic basis; and

 

   

reviewing and evaluating, at least annually, the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter.

Our Board of Directors reviews the NASDAQ listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 4350(d)(2)(A)(i) and (ii) of the NASDAQ listing standards). Our Board of Directors has determined Mr. Buono and Ms. Eastham qualify as audit committee financial experts within the meaning of applicable SEC regulations and NASDAQ Marketplace Rules. In making this determination, our Board has considered the formal education and nature and scope of their previous experience, coupled with their past and present service on various audit committees. Representatives of our independent auditors and management both periodically meet privately with the Audit Committee.

Report of the Audit Committee of the Board of Directors

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Genoptix under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2008 with our management. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with Those Charged with Governance, as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T. The Audit Committee has also received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence, and has discussed with the independent accountants the independent accountants’ independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

 

  Audit Committee  
  Timothy M. Buono, Chair  
  Robert E. Curry  
  Karin Eastham  

 

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Compensation Committee

The Compensation Committee operates pursuant to a written charter that is available on our website at http://investor.genoptix.com. The Compensation Committee consists of Michael A. Henos, Andrew E. Senyei, M.D., and Christine A. White, M.D. with Mr. Henos serving as the Chair of the Compensation Committee. The Compensation Committee met seven times during fiscal 2008. The functions of the Compensation Committee include, among other things:

 

   

reviewing and approving the compensation and other terms of employment of our executive officers;

 

   

reviewing and approving performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;

 

   

evaluating and approving the equity incentive plans, compensation plans and similar programs advisable for us, as well as modification or termination of existing plans and programs;

 

   

evaluating and recommending to Board of Directors the type and amount of compensation to be paid or awarded to Board members;

 

   

administering our equity incentive plans;

 

   

establishing policies with respect to equity compensation arrangements;

 

   

reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;

 

   

reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers;

 

   

reviewing with management our disclosures under the caption “Compensation Discussion and Analysis” and recommending to the full board its inclusion in our periodic reports to be filed with the SEC;

 

   

preparing the report that the SEC requires in our annual proxy statement;

 

   

reviewing the adequacy of our Compensation Committee charter on a periodic basis; and

 

   

reviewing and evaluating, at least annually, the performance of the Compensation Committee.

Typically, the Compensation Committee meets at least three times annually and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with our Chief Executive Officer. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, provide financial or other background information or advice or otherwise participate in Compensation Committee meetings. Our Chief Executive Officer may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding her compensation or individual performance objectives. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of Genoptix, as well as authority to obtain, at the expense of Genoptix, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. In particular, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms.

During the past fiscal year, the Compensation Committee engaged Radford Surveys & Consulting as compensation consultants, based primarily upon their reputation and the previous experience of certain committee members with Radford Surveys & Consulting. The Compensation Committee requested that Radford Surveys & Consulting:

 

   

evaluate the Company’s existing compensation strategy and practices in supporting and reinforcing the Company’s long-term strategic goals; and

 

12


   

assist in refining the Company’s compensation strategy and in developing and implementing an executive compensation program to execute that strategy.

As part of its engagement, Radford Surveys & Consulting was requested by the Compensation Committee to develop a comparative group of companies and to perform analyses of competitive performance and compensation levels for that group and to prepare a comprehensive detailed assessment of our executive compensation programs as compared to this group of companies. At the request of the Compensation Committee, Radford Surveys & Consulting also conducted interviews with certain members of the Compensation Committee and senior management to learn more about our business operations and strategy, key performance metrics and strategic goals, as well as the labor markets in which we compete. Radford Surveys & Consulting ultimately developed recommendations that were presented to the Compensation Committee for its consideration. Following an active dialogue with Radford Surveys & Consulting and resulting modifications, the Compensation Committee approved the recommendations of Radford Surveys & Consulting. These modified recommendations are discussed in the Compensation Discussion and Analysis section of this proxy statement.

Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In February 2008, the Compensation Committee formed a Non-Officer Stock Option Committee, currently comprised of Dr. Nova and Mr. Schuling, to which it delegated authority to grant, without any further action required by the Compensation Committee, stock options to employees and consultants who are not officers of Genoptix. The purpose of this delegation of authority is to enhance the flexibility of option administration within Genoptix and to facilitate the timely grant of options to non-management employees and consultants, particularly new employees and consultants, within specified limits approved by the Compensation Committee. In particular, the subcommittee may not grant options to acquire more than an aggregate of 300,000 shares to all employees per calendar year or 20,000 shares per individual employee per calendar year without obtaining additional delegated authority from the Compensation Committee. Stock option awards made by this subcommittee are typically granted on or about the same date each month to provide consistency and facilitate option administration. Typically, as part of its oversight function, the Compensation Committee will review on a quarterly basis the list of grants made by the subcommittee.

Recently, the Compensation Committee has made most significant adjustments to annual compensation, determined bonus and equity awards and established new performance objectives at one or more meetings held during the last quarter of the year or the first quarter of the next year. However, the Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year.

Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of her performance is conducted by the Compensation Committee, which determines any adjustments to her compensation as well as awards to be granted. For all executives and directors, as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current company-wide compensation levels, and recommendations of the Compensation Committee’s compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant.

The specific determinations of the Compensation Committee with respect to executive compensation are described in greater detail in the Compensation Discussion and Analysis section of this proxy statement.

 

13


Compensation Committee Interlocks and Insider Participation

During 2008, the following directors served as members of the Compensation Committee: Michael A. Henos, Andrew E. Senyei, M.D. and Arda M. Minocherhomjee, Ph.D. No member of our Compensation Committee has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee. We have had a Compensation Committee for nine years. Prior to establishing the Compensation Committee, our full Board of Directors made decisions relating to compensation of our executive officers.

Compensation Committee Report

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Genoptix under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on this review and discussion, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

 

  Compensation Committee  
  Michael A. Henos, Chairman  
  Andrew E. Senyei, M.D.  
  Christine A. White, M.D.  

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee operates pursuant to a written charter that is available on our website at http://investor.genoptix.com. The Nominating and Corporate Governance Committee consists of Karin Eastham, Andrew E. Senyei, M.D. and Christine A. White, M.D., with Dr. Senyei serving as the Chair of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee was established in connection with our initial public offering in 2007 and met three times during 2008. The functions of the Nominating and Corporate Governance Committee include, among other things:

 

   

identifying, reviewing and evaluating candidates to serve on our Board of Directors consistent with criteria approved by our Board of Directors;

 

   

determining the minimum qualifications for service on our Board of Directors;

 

   

evaluating director performance on the board and applicable committees of the Board and determining whether continued service on our Board is appropriate;

 

   

interviewing, evaluating, nominating and recommending individuals for membership on our Board of Directors;

 

   

assisting the members of our Compensation Committee in reviewing and recommending to our Board of Directors the compensation arrangements for our non-employee directors;

 

   

evaluating nominations by stockholders of candidates for election to our Board;

 

   

considering and assessing the independence of members of our Board of Directors;

 

14


   

developing, as appropriate, a set of corporate governance policies and principles, including a code of business conduct and ethics and reviewing and recommending to our Board of Directors any changes to such policies and principles;

 

   

considering questions of possible conflicts of interest of directors as such questions arise;

 

   

reviewing the adequacy of its charter on an annual basis; and

 

   

evaluating, at least annually, the performance of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of Genoptix, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time.

Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee considers diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board and Genoptix, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors’ overall service to us during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board of Directors by majority vote.

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: 1811 Aston Avenue, Carlsbad, California 92008, no later than the close of business on the 90th day nor earlier than the 120th day prior to the first anniversary of the preceding year’s annual meeting. Submissions must include (i) the name, age, business address and residence address of such nominee, (ii) the principal occupation or employment of such nominee, (iii) the class and number of shares of each class of our capital stock which are owned by such nominee, (iv) the date or dates on which such shares were acquired and the investment intent of such acquisition, (v) a completed and signed questionnaire, representation and agreement (as described in our bylaws) and (vi) such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the Securities Exchange Act of 1934, as amended. Additionally, stockholders who wish

 

15


to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board must include in the submission, as to the stockholder giving the notice, the name and address of such stockholder, the class, series and number of our shares that are owned by such stockholder, and such other information as is specified in our bylaws. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board should carefully review our bylaws for additional required information with respect to stockholder nominations of director candidates. To date, the Nominating and Corporate Governance Committee has not received or rejected a timely director nominee for election at an upcoming meeting from a stockholder or stockholders holding more than 5% of our voting stock.

Compliance Committee

The Compliance Committee consists of Timothy M. Buono, Robert E. Curry, Ph.D. and Laurence R. McCarthy, Ph.D., with Dr. Curry serving as the Chair of the Compliance Committee. The Compliance Committee met four times during fiscal 2008. The functions of the Compliance Committee include, among other things:

 

   

overseeing, monitoring, and evaluating our compliance with all regulatory obligations (with the exception of obligations relating to tax and securities-related laws);

 

   

reviewing our applicable standards, policies, and procedures with a focus on (1) our efforts towards continuous improvement in the quality of our laboratory and other healthcare-related services that we provide, and (2) our effort to be honest and ethical with laws governing (a) financial relationships between us and physician customers or other potential sources of referrals (e.g., anti-kickback and anti-referral laws), (b) Medicare reimbursement, and (c) conflicts of interest;

 

   

reviewing our efforts relating to employee education of regulatory and compliance requirements;

 

   

appointing, overseeing, and reviewing the activities of our chief compliance officer and reviewing periodic reports from our chief compliance officer;

 

   

meeting and reporting to our Board of Directors at least twice annually; and

 

   

recommending such actions or measures be adopted by the Board of Directors as it deems appropriate to improve the effectiveness of our compliance program.

Stockholder Communications with The Board Of Directors

Our Board of Directors has adopted a formal process by which our stockholders may communicate with the Board or individual directors. Information regarding this process is available on our website at http://investor.genoptix.com.

 

16


Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics relating to the conduct of our business by our employees, officers and directors. We intend to maintain the highest standards of ethical business practices and compliance with all laws and regulations applicable to our business. The Code of Business Conduct and Ethics is available on our website at http://investor.genoptix.com. If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a provision of the code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website at http://investor.genoptix.com.

Corporate Governance Guidelines

On November 5, 2008, the Board of Directors documented the governance practices followed by the Company by adopting Corporate Governance Guidelines to assure that the Board will have the necessary authority and practices in place to review and evaluate the Company’s business operations as needed and to make decisions that are independent of the Company’s management. The guidelines are also intended to align the interests of directors and management with those of the Company’s stockholders. The Corporate Governance Guidelines set forth the practices the Board intends to follow with respect to Board composition and selection, the role of the Board, Board meetings and involvement of senior management, Chief Executive Officer performance evaluation and succession planning, Board committees and compensation, and conflicts of interests and related-party transactions. The Corporate Governance Guidelines were adopted by the Board to, among other things, reflect changes to the Nasdaq listing standards and SEC rules adopted to implement provisions of the Sarbanes-Oxley Act of 2002. The Corporate Governance Guidelines, as well as the charters for each committee of the Board, may be viewed at http://investor.genoptix.com.

Accounting and Auditing Matters Open Door Policy

We have adopted an Open Door Policy on Reporting Complaints Regarding Accounting and Auditing Matters to facilitate the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, as well as the confidential, anonymous submission by our employees of concerns regarding these matters. Information regarding the process for reporting such complaints is available on our website at http://investor.genoptix.com.

 

17


PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Audit Committee of our Board of Directors has selected Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2009 and is seeking ratification of such selection by our stockholders at the annual meeting. Ernst & Young LLP has audited our financial statements since our inception in 1999. Representatives of Ernst & Young LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent auditors. However, the Audit Committee is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of Genoptix and our stockholders.

To be approved, the ratification of the selection of Ernst & Young LLP as our independent auditors must receive “For” votes from the majority of shares present and entitled to vote either in person or by proxy. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes will be counted towards a quorum, but will not be counted for any purpose in determining whether this matter has been approved.

Principal Accountant Fees and Services

In connection with the audit of our 2008 financial statements, our Audit Committee entered into an engagement agreement with Ernst & Young LLP which set forth the terms by which Ernst & Young LLP has performed audit services for Genoptix. That agreement is subject to alternative dispute resolution procedures.

The following table provides information regarding the aggregate fees billed to us by Ernst & Young LLP for the fiscal years ended December 31, 2008 and 2007. All fees described below were pre-approved by the Audit Committee.

 

     Years Ended December 31,
     2008    2007

Audit Fees (1)

   $ 598,865    $ 956,350

Audit related fees

     —        —  

Tax fees (2)

     238,997      112,398

All other fees (3)

     20,000      10,235
             

Total fees

   $ 857,862    $ 1,078,983
             

 

(1) Audit Fees consist of fees billed for professional services performed by Ernst & Young LLP for the audit and quarterly review of our consolidated financial statements ($76,048 for 2008 and $222,500 for 2007) and review of our Registration Statements on Forms S-1 and S-8, and preparation of comfort letters associated with our secondary offering, and related services that are normally provided in connection with statutory and regulatory filings or engagements.
(2) Tax Fees consist of fees billed in the indicated year for professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning.
(3) All Other Fees consist of fees billed in the indicated year for other permissible work performed by Ernst & Young LLP that is not included within the above category descriptions.

During the fiscal year ended December 31, 2008, none of the hours expended on our financial audit by Ernst & Young LLP were provided by persons other than Ernst & Young LLP’s full-time permanent employees.

 

18


Pre-Approval Policies and Procedures

Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent auditors, Ernst & Young LLP. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent auditor or on an individual explicit case-by-case basis before the independent auditor is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting.

The Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Ernst & Young LLP, and has concluded that the provision of such services is compatible with maintaining the independence of our auditors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.

 

19


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information regarding the beneficial ownership of our common stock as of March 31, 2009 by: (i) each of our directors and nominees for director, (ii) each of our executive officers named in our Summary Compensation Table, (iii) all of our directors and executive officers as a group and (iv) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. The table is based upon information supplied by our officers, directors and principal stockholders and a review of Schedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicated in the footnotes to the table and subject to community property laws where applicable, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned.

Applicable percentages are based on 16,817,470 shares outstanding on March 31, 2009, adjusted as required by rules promulgated by the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on May 30, 2009, which is 60 days after March 31, 2009. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

Name and Address of Beneficial Owner (1)

   Number of Shares
Beneficially Owned
   Percentage of
Shares Beneficially
Owned
 

5% Holders:

     

FMR LLC (2)

   1,975,645    11.8 %

82 Devonshire Street

Boston MA 02109

     

Next Century Growth Investors, LLC (3)

   1,235,259    7.4 %

5500 Wayzata Blvd., Suite 1275

Minneapolis MN 55416

     

Directors and executive officers:

     

Timothy M. Buono (4)

   9,650    *  

Robert E. Curry, Ph.D. (5)

   47,137    *  

Karin Eastham (6)

   4,027    *  

Michael Henos (7)

   14,953    *  

Laurence R. McCarthy, Ph.D. (8)

   4,027    *  

Andrew E. Senyei, M.D. (9)

   21,849    *  

Christine A. White, M.D. (10)

   1,527    *  

Tina S. Nova, Ph.D. (11)

   453,768    2.6 %

Samuel D. Riccitelli (12)

   203,578    1.2 %

Douglas A. Schuling (13)

   157,493    *  

Christian V. Kuhlen, M.D., Esq. (14)

   14,161    *  

All executive officers and directors as a group
(11 persons) (15)

   932,170    5.3 %

 

 * Represents beneficial ownership of less than 1%.
(1) Except as otherwise noted above, the address for each person or entity listed in the table is c/o Genoptix, Inc., 1811 Aston Avenue, Carlsbad, CA 92008.
(2)

Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC and a registered investment advisor, beneficially owns 1,888,213 shares of our common stock as a result of acting as investment advisor to various investment companies. Fidelity Contrafund, one of these investment companies, beneficially owns 1,042,357 of these shares. FMR LLC, through its control of

 

20


 

Fidelity, and Edward C. Johnson 3d each have sole power to dispose of 1,888,213 of these shares. Pyramis Global Advisors Trust Company (“PGATC”), an indirect wholly-owned subsidiary of FMR LLC, is the beneficial owner of 87,432 shares of our common stock as a result of its serving as investment manager of institutional accounts owning such shares. FMR LLC, through its control of PGATC, and Edward C. Johnson 3d each have sole power to dispose of 87,432 of these shares and sole power to vote or to direct the voting of 76,632 of these shares. This information is based solely on a Schedule 13G/A filed by FMR LLC and Edward C. Johnson 3d with the SEC on February 17, 2009.

(3) These shares of common stock may be deemed to be beneficially owned by (1) Next Century Growth Investors, LLC by virtue of its investment discretion and/or voting power over client securities, which may be revoked; and (2) Thomas L. Press and Donald M. Longlet, as a result of their positions with and ownership positions in Next Century Growth Investors, LLC, which could be deemed to confer upon each of them voting and/or investment power over the shares. Each of Next Century Growth Investors, LLC, Thomas L. Press and Donald M. Longlet disclaim beneficial ownership of these shares except to the extent of each of their respective pecuniary interested therein, if any. This information is based solely on a Schedule 13G/A filed by the above-named entity and persons with the SEC on March 18, 2009.
(4) Includes 6,492 shares that Mr. Buono has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(5) Includes 42,054 shares that Dr. Curry has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(6) Includes 3,194 shares that Ms. Eastham has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(7) Includes 5,311 shares that Mr. Henos has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(8) Includes 3,194 shares that Dr. McCarthy has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(9) Includes 12,986 shares that Dr. Senyei has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(10) Includes 1,527 shares that Dr. White has the right to acquire from us within 60 days after March 31, 2009 pursuant to the exercise of stock options.
(11) Includes 445,840 shares that Dr. Nova has the right to acquire from us within 60 days after March 31, 2009 pursuant to the release of 2,758 restricted stock unit awards and exercise of 443,082 stock options, of which 33,224 would be initially unvested and subject to a right of repurchase by us as of May 30, 2009 that would lapse over the vesting schedule.
(12) Includes 198,432 shares that Mr. Riccitelli has the right to acquire from us within 60 days after March 31, 2009 pursuant to the release of 1,733 restricted stock unit awards and exercise of 196,699 stock options, of which 14,191 would be initially unvested and subject to a right of repurchase by us as of May 30, 2009 that would lapse over the vesting schedule.
(13) Includes 152,999 shares that Mr. Schuling has the right to acquire from us within 60 days after March 31, 2009 pursuant to the release of 1,266 restricted stock unit awards and exercise of 151,733 stock options, of which 12,085 would be initially unvested and subject to a right of repurchase by us as of May 30, 2009 that would lapse over the vesting schedule.
(14) Includes 11,304 shares that Dr. Kuhlen has the right to acquire from us within 60 days after March 31, 2009 pursuant to the release of 608 restricted stock unit awards and exercise of 10,696 stock options.
(15) Includes the shares referred to in footnotes (4), (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14).

 

21


SECURITIES AUTHORIZED FOR ISSUANCE

UNDER EQUITY COMPENSATION PLANS

The following table summarizes securities available under our equity compensation plans as of December 31, 2008:

 

     Number of
Securities to
be Issued
Upon Exercise
of Outstanding
Options,
Warrants and
Awards
    Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Awards
    Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(excluding
securities
reflected in
column (a))
     (a)     (b)     (c)

Equity compensation plans approved by security holders:

      

2001 Equity Incentive Plan

   1,174,084     $ 1.32     —  

2007 Equity Incentive Plan

   919,181 (1)   $ 28.32 (2)   1,183,569

2007 Non-Employee Directors’ Stock Option Plan

   42,881     $ 30.02     205,938

2007 Employee Stock Purchase Plan(3)

   —       $ —       564,610

Equity compensation plans not approved by security holders:

      

None

      

 

(1) Represents 773,843 shares issuable upon exercise of options and 145,338 shares issuable under restricted stock unit awards.
(2) Restricted stock unit awards have been excluded for purposes of computing weighted-average exercise price.
(3) The employee stock purchase occurred and common shares were issued on December 31, 2008. Therefore, there were no outstanding employee contributions, shares or weighted average exercise price thereof as of December 31, 2008.

Our 2007 Equity Incentive Plan, or the 2007 EIP, provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards. In addition, the 2007 EIP provides for the grant of performance cash awards. The aggregate number of shares of common stock that was initially authorized for issuance pursuant to stock awards under the 2007 EIP was 1,500,000 shares, plus 75,421 shares that remained available for future issuance under our 2001 Equity Incentive Plan, or the 2001 EIP, as of the effective date of the 2007 EIP. As of December 31, 2008, there was an aggregate of 2,136,146 shares of common stock authorized under the 2007 EIP, including 1,183,569 shares available for future issuance thereunder and shares reserved for issuance in connection with outstanding stock awards. In addition, the number of shares of common stock reserved for issuance automatically increases (i) on January 1 of each calendar year, from January 1, 2008 through January 1, 2017, by the least of (a) 3% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, (b) 750,000 shares, or (c) a number determined by our board of directors that is less than (a) or (b) and (ii) from time to time by the number of shares that are issuable pursuant to options under the 2001 EIP that are forfeited or expire. On January 1, 2009, the number of shares of common stock reserved for issuance under our 2007 EIP was automatically increased by 500,470 shares.

The 2007 Non-Employee Directors’ Stock Option Plan, or the 2007 Directors’ Plan, provides for the automatic grant of nonstatutory stock options to purchase shares of our common stock to our non-employee

 

22


directors. An aggregate of 250,000 shares of common stock was initially reserved for issuance under the 2007 Directors’ Plan. As of December 31, 2008, there was an aggregate of 250,000 shares of common stock authorized under the 2007 Directors’ Plan, including 205,938 shares available for future issuance thereunder and shares reserved for issuance in connection with outstanding stock options. This amount increases automatically annually on the first day of our fiscal year, from 2008 until 2017, by an aggregate number of shares of our common stock equal to the number of shares subject to options granted as initial grants and annual grants under the 2007 Directors’ Plan during the immediately preceding year or a lesser amount as determined by our board of directors. On January 1, 2009, the number of shares of common stock reserved for issuance under our 2007 Directors’ Plan was automatically increased by 46,250 shares.

The 2007 Employee Stock Purchase Plan, or the 2007 ESPP, authorizes the issuance of shares of our common stock pursuant to purchase rights granted to our employees. An aggregate of 500,000 shares of common stock was initially reserved for issuance under the 2007 ESPP. As of December 31, 2008, there was an aggregate of 564,610 shares of common stock authorized under the ESPP, all of which were available for future issuance thereunder. The number of shares of our common stock reserved for issuance automatically increases on January 1 of each calendar year, from January 1, 2008 through January 1, 2017, by the least of (a) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, (b) 250,000 shares or (c) a number determined by our board of directors that is less than (a) or (b). On January 1, 2009, the number of shares of common stock reserved for issuance under our 2007 ESPP was automatically increased by 166,823 shares.

 

23


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2008, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except that due to an administrative oversight Alliance Technology Ventures III LP and ATV III Affiliates, L.P., of which Mr. Henos is a manager of the general partner controlling those entities, failed to timely file one report covering an aggregate of two transactions.

 

24


NON-EMPLOYEE DIRECTOR COMPENSATION

The following table sets forth in summary form information concerning the compensation that we paid or awarded during the year ended December 31, 2008 to each of our non-employee directors:

 

Name

   Fees Earned or
Paid In Cash
($) (1)
   Stock Awards
($) (2)(3)
   Option Awards
($) (2)(4)
   Total
($)

Timothy M. Buono (5)

   $ 52,575    $ 230,700    $ 167,761    $ 451,036

Robert E. Curry, Ph.D. (6)

     45,945      230,700      167,761      444,406

Karin Eastham (7)

     17,729      145,850      111,739      275,318

Michael A. Henos (5)

     45,470      230,700      167,761      443,931

Laurence R. McCarthy, Ph.D. (7)

     17,753      145,850      111,739      275,342

Arda M. Minocherhomjee, Ph.D. (5)

     45,108      230,700      167,761      443,569

Andrew E. Senyei, M.D. (8)

     68,104      461,400      335,522      865,026

Stephen L. Spotts (9)

     21,264      —        —        21,264

Thomas A. Waltz, M.D. (10)

     39,725      230,700      167,761      438,186

 

(1) Our Non-Employee Director Compensation Policy became effective for all of our non-employee directors on the effective date of our initial public offering in October 2007 and was revised in May 2008. The amounts in this column represent the amounts paid in annual retainers and meeting attendance fees to our non-employee directors for their service on the Board and committees of the Board in 2008.
(2) Represents the stock and option award compensation cost for 2008, which was calculated in accordance with SFAS No. 123R using the modified prospective transition method without consideration of forfeitures. For a discussion of valuation assumptions, see the section entitled “Stock-Based Compensation” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the notes to our consolidated financial statement each included in our Annual Report on Form 10-K for the year ended December 31, 2008.
(3) Initial stock awards vest in equal installments on a quarterly basis over three years and annual stock awards vest in equal installments on a quarterly basis over one year in four equal installments. In addition, if a change in control occurs, then the vesting and exercisability of the director’s options will accelerate in full.
(4) Option awards vest in equal installments on a monthly basis over three years for initial stock option awards and over one year for annual stock option awards. In addition, if a change in control occurs, then the vesting and exercisability of the director’s options will accelerate in full.
(5) The aggregate number of shares subject to outstanding stock awards was 5,417 for each of Mr. Buono, Mr. Henos and Dr. Minocherhomjee, as of December 31, 2008. The aggregate number of shares subject to outstanding option awards was 12,569 for Mr. Henos and 13,750 for each of Mr. Buono and Dr. Minocherhomjee, as of December 31, 2008. The grant date fair value and intrinsic value of the option and stock awards, respectively, granted in 2008 are as follows:

 

                    Stock Awards   Option Awards

Grant
Date

      Term
(years)
      Vesting   Number
of Shares
  Intrinsic
Value
  Number
of Shares
  Exercise
Price
($/share)
  Grant Date
Fair Value
($)

06/17/2008

    1     1 year (1/12th monthly)   —     —     3,750   30.76   43,222

06/17/2008

    3     3 years (1/36th monthly)   —     —     10,000   30.76   124,539

06/17/2008

    1     1 year (1/4th quarterly)   2,500   76,900   —     —     —  

06/17/2008

    3     3 years (1/12th quarterly)   5,000   153,800   —     —     —  

 

(6) The aggregate number of shares subject to outstanding stock and option awards was 5,417 and 49,312, respectively, as of December 31, 2008. The grant date fair value and intrinsic value of the option and stock awards, respectively, granted in 2008 are as follows:

 

                    Stock Awards   Option Awards

Grant
Date

      Term
(years)
      Vesting   Number
of Shares
  Intrinsic
Value
  Number
of Shares
  Exercise
Price
($/share)
  Grant Date
Fair Value
($)

06/17/2008

    1     1 year (1/12th monthly)   —     —     3,750   30.76   43,222

06/17/2008

    3     3 years (1/36th monthly)   —     —     10,000   30.76   124,539

06/17/2008

    1     1 year (1/4th quarterly)   2,500   76,900   —     —     —  

06/17/2008

    3     3 years (1/12th quarterly)   5,000   153,800   —     —     —  

 

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(7) The aggregate number of shares subject to outstanding stock and option awards was 4,584 and 10,000, respectively, as of December 31, 2008. The grant date fair value and intrinsic value of the option and stock awards, respectively, granted in 2008 are as follows:

 

                    Stock Awards   Option Awards

Grant
Date

      Term
(years)
      Vesting   Number
of Shares
  Intrinsic
Value
  Number
of Shares
  Exercise
Price
($/share)
  Grant Date
Fair Value
($)

07/30/2008

    3     3 years (1/36th monthly)   —     —     10,000   29.17   111,739

07/30/2008

    3     3 years (1/12th quarterly)   5,000   145,850   —     —     —  

 

(8) The aggregate number of shares subject to outstanding stock and option awards was 10,834 and 27,500, respectively, as of December 31, 2008. The grant date fair value and intrinsic value of the option and stock awards, respectively, granted in 2008 are as follows:

 

                    Stock Awards   Option Awards

Grant
Date

      Term
(years)
      Vesting   Number
of Shares
  Intrinsic
Value
  Number
of Shares
  Exercise
Price
($/share)
  Grant Date
Fair Value
($)

06/17/2008

    1     1 year (1/12th monthly)   —     —     7,500   30.76   86,444

06/17/2008

    3     3 years (1/36th monthly)   —     —     20,000   30.76   249,078

06/17/2008

    1     1 year (1/4th quarterly)   5,000   153,800   —     —     —  

06/17/2008

    3     3 years (1/12th quarterly)   10,000   307,600   —     —     —  

 

(9) Mr. Spotts elected not to stand for re-election at the 2008 annual meeting. No stock or option awards were granted to Mr. Spotts in 2008 and, as a result of his departure from our Boars of Directors, he held no outstanding options or stock awards as of December 31, 2008.
(10) Dr. Waltz passed away in December 2008. The aggregate number of shares subject to outstanding option awards held by Dr. Waltz’ estate as of December 31, 2008 was 35,894. The grant date fair value of the stock and option awards granted in 2008 are as follows:

 

                    Stock Awards   Option Awards

Grant
Date

      Term
(years)
      Vesting   Number
of Shares
  Intrinsic
Value
  Number
of Shares
  Exercise
Price
($/share)
  Grant Date
Fair Value
($)

06/17/2008

    1     1 year (1/12th monthly)   —     —     3,750   30.76   43,222

06/17/2008

    3     3 years (1/36th monthly)   —     —     10,000   30.76   124,539

06/17/2008

    1     1 year (1/4th quarterly)   2,500   76,900   —     —     —  

06/17/2008

    3     3 years (1/12th quarterly)   5,000   153,800   —     —     —  

Prior to our initial public offering in October 2007, we did not provide cash compensation to directors for their services as directors or members of committees of the Board of Directors. We have reimbursed and will continue to reimburse our non-employee directors for their travel, lodging and other reasonable expenses incurred in attending meetings of our Board of Directors and committees of the Board of Directors.

In July 2007, the Compensation Committee adopted a compensation program for our non-employee directors, or the Non-Employee Director Compensation Policy. The Non-Employee Director Compensation Policy was effective for all of our non-employee directors on the effective date of our initial public offering in October 2007. Pursuant to the Non-Employee Director Compensation Policy, as amended in May 2008, each member of our Board of Directors who is not our employee receives the following cash compensation for board services, as applicable:

 

   

$35,000 per year for service as a Board member;

 

   

$30,000 per year for service as the Chairman of the Board;

 

26


   

$15,000 per year for service as Chairperson of the Audit Committee and $7,500 for service as a member of such committee;

 

   

$10,000 per year for service as Chairperson of the Compensation Committee or the Compliance Committee and $5,000 for service as a member of either committee; and

 

   

$5,000 per year for service as Chairperson of the Nominating and Corporate Governance Committee and $2,500 for service as a member of such committee.

The Non-Employee Director Compensation Policy requires that our Board members endeavor to attend at least 75% of the meetings of the Board of Directors and the committees on which a particular director serves.

In addition, our non-employee directors receive initial and annual, automatic, non-discretionary grants of nonqualified stock options under the terms and provisions of our 2007 Directors’ Plan and initial and annual, automatic, non-discretionary grants of restricted stock unit awards under the terms and provisions of our 2007 EIP and our Non-Employee Director Compensation Policy.

Each new non-employee director joining our Board of Directors is automatically granted a non-statutory stock option to purchase 10,000 shares of our common stock with an exercise price equal to the then fair market value of our common stock under our 2007 Directors’ Plan. On the date of each annual meeting of our stockholders, each non-employee director is also automatically granted a non-statutory stock option to purchase 3,750 shares of our common stock on that date with an exercise price equal to the then fair market value of our common stock under our 2007 Directors’ Plan. Initial grants vest monthly over three years and annual grants vest in twelve equal monthly installments. All stock options granted under our 2007 Directors’ Plan have a term of ten years and vesting automatically accelerates upon the closing of a change in control transaction.

Each new non-employee director joining our Board of Directors automatically receives a restricted stock unit award grant of 5,000 shares of common stock under our 2007 EIP. On the date of each annual meeting of our stockholders, each non-employee director also automatically receives a restricted stock unit award grant of 2,500 shares of our common stock on that date under our 2007 EIP. Initial grants vest quarterly over three years and annual grants vest in four equal quarterly installments. All restricted stock units granted under our 2007 EIP have a term of ten years and vesting automatically accelerates upon the closing of a change in control transaction.

The Non-Employee Director Compensation Policy further provides that the Chair of the Board receives twice the number of shares subject to the annual stock option and restricted stock unit awards for service as Chair of the Board and, in the event the Chair of the Board is first elected to the Board and as its Chair simultaneously, the Chair of the Board would receive twice the number of shares subject to the initial stock option and restricted stock unit awards.

On the date of our 2008 annual meeting, each non-employee director, except Dr. Senyei, also received a one-time equity award consisting of a nonqualified stock option to purchase 10,000 shares of our common stock and a restricted stock unit award grant of 5,000 shares of our common stock in recognition of the fact that they had either never received equity awards or had not received equity awards in almost three years. Dr. Senyei, the Chairman of our Board of Directors, received a one-time equity award consisting of a nonqualified stock option to purchase 20,000 shares of our common stock and a restricted stock unit award grant of 10,000 shares of our common stock in recognition of the fact that he had never previously received any equity awards. These equity awards were granted under our 2007 EIP and vest over three years, with the options vesting in equal monthly installments and the restricted stock unit awards vesting in equal quarterly installments, and each containing the same acceleration of vesting provisions as the initial and annual nonqualified stock option awards granted under the 2007 Directors’ Plan.

 

27


EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

The Compensation Committee of our Board of Directors, which is composed entirely of independent directors, administers our executive compensation program. The role of our Compensation Committee includes:

 

   

reviewing, modifying, and approving our overall compensation strategy and policies;

 

   

overseeing and administering our compensation and benefit plans;

 

   

reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for our executive officers;

 

   

reviewing and approving, generally on an annual basis, all compensation decisions relating to our executive officers;

 

   

overseeing the preparation of, and approving, this section of our annual proxy statement; and

 

   

engaging outside advisors, as appropriate, including but not limited to attorneys, compensation consultants and accountants.

Compensation Philosophy

Our executive compensation programs are designed to:

 

   

attract, motivate and retain executives of outstanding ability and potential;

 

   

reward the achievement of key performance measures, including meeting or exceeding our revenue and profit objectives and operational goals, such as executing on our hiring plan and infrastructure expansion in line with our growth objectives and cash management goals, all as set forth in our annual operating plan; and

 

   

ensure that executive compensation is meaningfully related to the creation of stockholder value.

Our Compensation Committee believes that our executive compensation programs should include short-term and long-term incentive components to motivate executives to attain our short-term and long-term performance objectives through a mix of cash and equity-based incentive compensation. Our compensation programs are designed to reward performance that consistently meets or exceeds expectations by increasing base salary levels, awarding annual cash bonuses for performance that meets or exceeds target levels, and granting additional equity awards. Our Compensation Committee believes that when our and our executives’ performance does not meet key objectives, cash and equity incentive award payments, if any, should be less than target levels. Our Compensation Committee evaluates both performance and compensation levels to make sure that the compensation provided to our executives remains competitive relative to compensation paid by companies with similar financial profiles in the medical laboratory and life sciences industries, taking into account our relative performance and our own strategic objectives.

Setting Executive Compensation

Our Compensation Committee reviews and determines generally on an annual basis the compensation to be paid to our chief executive officer and other executive officers. As part of this process, our Compensation Committee conducts an annual review of the aggregate level of our executive compensation, as well as the mix of elements used to compensate our executive officers. Prior to 2008, before we became a publicly traded company, our Compensation Committee did not benchmark our executive compensation against a particular group of companies that it considered to be comparable to us or any other group of companies. Instead, the Compensation Committee generally considered compensation paid by life sciences and healthcare services companies included

 

28


in executive compensation surveys, together with other information available to it based upon the extensive experience of the Compensation Committee members, and then used its subjective discretion to make compensation decisions.

Compensation Benchmarking and Peer Group

In early 2008, our Compensation Committee retained the services of Radford, a third party executive compensation consultant, to provide recommendations and supporting data for establishing the cash and equity compensation levels for our executive officers for 2008. Based upon the recommendations of this executive compensation consultant and a comprehensive review of our executive compensation policies, in April 2008 our Compensation Committee (a) identified a peer group of healthcare services and clinical diagnostic companies that were comparable to us, and (b) benchmarked our executive compensation against that peer group. Based on the information provided using publicly available data relating to the compensation practices and policies of other companies in our identified peer group, our Compensation Committee made adjustments in our executive compensation levels for 2008. The peer group identified in April 2008 consisted of the following companies:

 

Abaxis   GenProbe   Meridian Bioscience   Sequenom
Cepheid   Illumina   Monogram Biosciences   Somanetics
Clinical Data   Immucor   NightHawk Radiology   Third Wave Technologies
Enzo Biochem   IRIS International   OraSure Technologies    
eResearch Technology   Luminex   Orchid Cellmark    
Genomic Health   MEDTOX Scientific   Quidel    

In December 2008, again with the assistance of Radford and based in part on the continuing rapid development of our company, we refined our peer group for purposes of benchmarking our executive compensation. Following a reassessment of our peer group, our Compensation Committee reviewed our executive compensation and benchmarked our executive compensation against companies generally in the medical laboratory and research-based life sciences industry, primarily those with similar financial profiles, including similar market values, revenues and employee size. The peer group identified in December 2008 consisted of the following companies:

 

Abaxis*   Enzo Biochem*   Immucor*   Quidel*
Accuray   eResearch Technology*   IRIS International*   RTI Biologics
Alphatec Holdings   Exactech   Laboratory Corp. of America Holdings   Sequenom*
ArthroCare   Genomic Health*   Luminex*   SonoSite
Bio-Reference Laboratories   GenProbe*   Meridian Bioscience*   Surmodics
Cepheid   Hologic (formerly Third Wave Technologies)*   Natus Medical   VNUS Medical Technologies
Cyberonics   Illumina*   OraSure Technologies*    

 

* Also a peer company identified in April 2008.

Our Compensation Committee generally believes that gathering appropriate benchmark information is an important part of our compensation-related decision-making process and while this exercise does not perfectly capture all the unique aspects of our business, it typically provides a solid foundation for making executive compensation decisions. In addition, our Compensation Committee continues to consider performance and the expected future contributions of our executive officers and has typically taken into account advice from other independent members of our Board of Directors.

 

29


Determining 2008 Executive Compensation Levels

In setting executive compensation levels for 2008, our Compensation Committee initially sought to position our executive compensation levels more toward approximately the 50th percentile for base salary, total cash compensation and long-term compensation of our identified peer group. Additionally, our Compensation Committee also considered our actual performance as measured against the key performance objectives set forth in our annual operating plan, including revenue, business growth and profitability objectives. Our Compensation Committee also considers key executive contributions leading to attainment of, or achievement in excess of, those objectives. Our Compensation Committee evaluated the overall performance of Genoptix as well as the individual contributions of our executive officers (because attainment of certain performance objectives may result primarily from the extraordinary performance of one or more of our executive officers). During 2008, our key corporate accomplishments included: meeting or exceeding revenue targets; meeting or exceeding operating income targets; meeting or exceeding earnings-per-share targets; consistent increases in weekly test orders substantially above those projected in our annual operating plan; significant increases in our market share; increases in gross margins and overall profitability as compared to those projected in our annual operating plan; favorable cash collections and DSO; validation and implementation of new tests; implementation of information and billing systems upgrades; the successful hiring of sales, client services, billing, laboratory operations and other personnel; continued quality assurance and regulatory compliance; efficient and timely expansion of our laboratory and administrative facilities; and significant expansion of our testing capabilities and infrastructure. During 2008, our executive officers substantially exceeded the key performance objectives included in our annual operating plan.

The recent general economic downturn has not substantially impacted our business, and thus, our compensation decisions. In December of 2008, in order to reward the continued high level of performance of our executive officers reflected in our substantial growth and the attainment of our key performance objectives, our Compensation Committee made changes to set executive compensation levels to approximate the 75th percentile of our identified peer group for total cash compensation for 2008 and for base salary and total potential cash compensation for 2009, and determined to approximate and maintain long-term compensation at the 50th percentile of our identified peer group. Our Compensation Committee has considered and intends to continue to consider each of the key performance objectives included in our annual operating plan and individual contributions by our executive officers that lead to the achievement of these performance objectives in setting executive base compensation, performance bonus target levels, awards of performance bonuses, and long-term incentives.

Role of Chief Executive Officer in Compensation Decisions

Our chief executive officer typically evaluates the performance of other executive officers and employees on an annual basis and makes recommendations to our Compensation Committee with respect to annual salary adjustments, bonuses and annual equity awards. Our Compensation Committee exercises its own discretion in determining salary adjustments and discretionary cash and equity-based awards for all executive officers. Our chief executive officer is not present during deliberations or voting with respect to compensation decisions made for our chief executive officer.

Elements of Executive Compensation

During 2008, our executive compensation program consisted of the following elements:

 

   

base salaries;

 

   

annual cash incentives;

 

   

long-term equity incentives;

 

   

retirement, health, and welfare benefits; and

 

   

severance/termination benefits.

 

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Our compensation program has historically been weighted toward long-term compensation as opposed to short-term or cash-based compensation. As we have become profitable and continued to grow our revenue and business, our short-term cash-based compensation has become a more substantial component of total executive compensation. However, if we achieve our corporate goals, we expect the long-term equity awards granted to our executives to continue to be a very significant component of overall compensation. As discussed in more detail below, base salary and target bonus compensation levels are determined after reviewing benchmarking data and other competitive market factors. Our annual executive bonus plan sets cash bonus targets as a percentage of base salary. We provide long-term performance incentives in the form of stock option and restricted stock unit equity awards. On average in 2008, 61% of total executive compensation was provided in the form of base salary and annual cash bonus incentives, and 39% of total executive compensation was provided in the form of long-term equity incentives.

Base Salary. In April 2008, as part of our first comprehensive review of our executive compensation as a publicly traded company, our Compensation Committee sought to position executive compensation levels at the 50th percentile for base salary against our identified peer group. Base salaries for our executives were also established based on the scope of their responsibilities and each executive officer’s individual experience. Base salaries are reviewed annually, typically in connection with our annual performance review process, and adjusted from time to time to realign salaries with market levels of our identified peer group, after taking into account individual responsibilities, performance and experience. Our Compensation Committee does not apply specific formulas to determine increases, although it has generally awarded increases as a percentage of an executive officer’s then current base salary.

In April 2008, as part of the this comprehensive review of our executive compensation (i) Dr. Nova’s annual base salary was increased to $430,000, (ii) Mr. Riccitelli’s annual base salary was increased from to $370,000, (iii) Mr. Schuling’s annual base salary was increased to $285,000 and (iv) Dr. Kuhlen’s annual base salary was increased to $240,000, in each case to position our 2008 executive compensation levels at the 50th percentile for base salary against our identified peer group.

In December 2008, as part of our annual comprehensive review of our executive compensation and based upon both our longer-term compensation philosophy on base salary and our company’s performance, our Compensation Committee sought to reposition executive base salary levels at the 75th percentile against our identified peer group. Accordingly, our Compensation Committee established 2009 annual base salaries of $555,000 for Dr. Nova, $415,000 for Mr. Riccitelli, $335,000 for Mr. Schuling and $285,000 for Dr. Kuhlen.

In approving these base salary adjustments, our Compensation Committee reviewed the executive compensation benchmarking data provided by Radford, the high level of performance and substantial commitment demonstrated by each of our executive officers during 2008, the amount of prior year increases, our financial performance to date in 2008, including our profitability, the performance of our stock price (particularly when measured against peer companies) and our performance against the operating plan for 2008, including achievements of our profitability objectives set forth in the 2008 operating plan and the satisfaction of other performance measures and objectives included in our operating plan, including successful cash collections, DSOs, gross margins, and operating income and attaining hiring and infrastructure expansion objectives as well as other key operational objectives. These factors, taken as a whole, were subjectively assessed by our Compensation Committee in determining the increases in our executive officers’ base salaries. Based on the information provided, our Compensation Committee believes that the base salary levels of our executives are commensurate with the general salary levels for similar positions at companies with similar financial profiles in the medical laboratory and life sciences industries. As described above, future annual performance reviews will generally be conducted to re-asses the accuracy of this benchmark.

Annual Executive Performance Cash Bonus Plan. We believe that annual performance-based cash bonuses play an important role in providing appropriate incentives for our executives to achieve our short-term financial performance and other short-term strategic objectives. In January 2008, our Compensation Committee set the

 

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target 2008 annual cash bonus levels as a percentage of 2008 base salary for each of our executive as follows: 40% for Dr. Nova, 30% for Mr. Riccitelli, 30% for Mr. Schuling and 30% for Dr. Kuhlen. In setting these target bonus levels for 2008, our Compensation Committee considered (1) our superior financial performance in 2008 and prior years, including that we exceeded our revenue and profitability targets during 2007, (2) our growth and expansion into new product offerings, (3) the substantial contribution and commitment that each of the executive officers consistently demonstrated and (4) the general annual discretionary bonus levels of other companies in the life sciences and healthcare fields. Under our annual executive bonus plan, our Compensation Committee generally has discretion to award a bonus amount equal to 0 to 150% of the applicable target amount.

In April 2008, as part of our first comprehensive review of our executive compensation as a publicly traded company, our Compensation Committee modified our target 2008 annual cash bonus levels to move closer toward the 50th percentile of target bonus levels for executives in similar corporate positions within companies in our identified peer group, in line with our longer term compensation philosophy around annual incentives. Based on the information provided, our Compensation Committee increased the target 2008 annual bonus levels as a percentage of 2008 base salary to 50% for Dr. Nova, 40% for Mr. Riccitelli and 35% for Mr. Schuling. Dr. Kuhlen’s target bonus level remained at 30% of his 2008 base salary.

In December 2008, based upon our company’s and Dr. Nova’s performance in 2008, our Compensation Committee further amended our annual executive bonus plan for 2008 to provide that our Compensation Committee has the discretion to award a bonus to Dr. Nova equal to 0 to 200% of her applicable target bonus percentage. In making this change, our Compensation Committee considered its desire to increase total cash compensation for 2008 to approximately the 75th percentile of our identified peer group and considered our superior performance in 2008 and prior years, including our profitability, the performance of our stock price (particularly when measured against peer companies), the substantial contribution and commitment that Dr. Nova demonstrated during 2008 and our actual corporate performance against our operating plan performance objectives for 2008.

In December 2008, our Compensation Committee reviewed the actual performance of our executive officers during 2008 and awarded discretionary annual cash bonuses for 2008 performance as follows: $430,000 for Dr. Nova, $222,000 for Mr. Riccitelli, $149,625 for Mr. Schuling and $108,000 for Dr. Kuhlen. In awarding these discretionary bonus amounts for 2008, our Compensation Committee considered (1) individual performance against individual goals based on each executive officer’s respective area of responsibility and the achievement of the performance measures and objectives included in our operating plan for 2008, (2) the high level of performance and substantial commitment demonstrated by each of our executive officers, (3) the information provided by Radford, including the compensation levels of similarly situated executive officers at other companies in our identified peer group and (4) our performance against our operating plan for 2008, including achieving and exceeding our revenue, operating income, DSO and other operating objectives, increasing shareholder value, enhancing our infrastructure to facilitate continued growth, maintaining financial reporting and regulatory compliance controls and procedures, and achieving other corporate goals outlined by our Compensation Committee. Our performance criteria are collectively designed to be challenging but attainable, thereby requiring a high level of performance by our executive officers and our company in order for these officers to receive any significant bonus compensation. These discretionary bonuses were paid entirely in December 2008 and are reflected in the column titled “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table on page 36.

In December 2008, our Compensation Committee reviewed the target 2009 annual bonus levels for each of our executive officers under our annual executive bonus plan and set the target 2009 annual bonus levels as a percentage of 2009 base salary for each of our executive as follows: 80% for Dr. Nova, 55% for Mr. Riccitelli, 50% for Mr. Schuling and 35% for Dr. Kuhlen. In aligning these target 2009 annual bonus levels with our longer term compensation philosophy, our Compensation Committee used the information provided by Radford to modify the 2009 annual target bonus levels to approximate the 75th percentile of target bonus levels for corporate positions within companies in our identified peer group, with the potential to award bonuses above such levels for exceptional performance and below such levels (including discretion to not award bonuses) if our executives do not meet key objectives.

 

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Long-Term Equity Incentives. We grant equity awards in order to provide our executive officers with the opportunity to acquire and maintain an equity interest in our company and to share in the appreciation of the value of our common stock. The Committee believes that these grants directly motivate an executive to maximize long-term stockholder value and create an effective tool for incentivizing and retaining those executives who are most responsible for influencing stockholder value by further aligning our executive’s interests with those of our stockholders by increasing the reward to our executives when our stock price increases, and subjecting our executives to risks of declining stock value and business setbacks. Our equity grants also utilize vesting periods that serve as a retention device by encouraging our executives to continue in our employ in order to obtain the full value of the awards. All option grants typically vest over four years, with one quarter of the shares subject to the stock option vesting on the one year anniversary of the vesting commencement date and the remaining shares vesting in equal monthly installments thereafter over three years. All executive RSU awards typically vest over three years, with one third of the shares vesting on the one year anniversary of the vesting commencement date and the remaining shares vesting in equal quarterly installments thereafter over two years. Additional information regarding accelerated vesting prior to, upon or following a change in control is discussed below under “Potential Payment Under Employment Arrangements” below.

We have not adopted stock ownership guidelines. With the exception of a small number of shares acquired by our executive officers early in our corporate history in connection with the founding of our company, our equity benefit plans have provided our executive officers the only means to acquire equity or equity-linked interests in Genoptix. Participation in our 2007 ESPP is also available to all executive officers on the same basis as our other employees.

We do not have any program, plan or obligation that requires us to grant equity compensation on specified dates. However, equity awards to executives are granted generally only at the regularly scheduled meetings of the Compensation Committee. The exercise price of stock options granted by the Compensation Committee are priced using the closing market price of our common stock as quoted by The Nasdaq Global Market on the date the committee approved the grant or, if the grant is to occur on a later date, the closing market price of our common stock as quoted by The Nasdaq Global Market on such later date. We have not attempted to coordinate equity awards with the release of material non-public information. Authority to grant equity grants to executive officers rests with our Compensation Committee, although our Compensation Committee does consider the recommendations of our chief executive officer for approving grants to officers other than herself.

In general, we also grant stock options to our newly hired executive officers as an incentive to commence employment. In determining the number of options to be granted to newly hired executive officers, we take into consideration the individual’s position, scope of responsibility, ability to affect profits and stockholder value, and the value of stock options in relation to other elements of total compensation. We also look at external factors such as current market conditions for executive employees and competitive peer or survey data, as applicable to the position, to determine the number and value of shares to be granted. We also engage in direct negotiations with the candidate over the terms of employment, including the size of the stock option to be granted if the candidate accepts our offer of employment.

Stock Option Grants. In April 2008, as part of our first comprehensive review of our executive compensation as a publicly traded company, our Compensation Committee sought to position executive equity grant levels at the 50th percentile against our identified peer group and to provide additional equity grants above such levels for our and our executives’ continued superior performance and to compensate for the lack of equity grants being made to our executive officers in 2007 (other than to Dr. Kuhlen who commenced employment with us in 2007). In connection with this comprehensive review of our executive compensation, our Compensation Committee approved the grant of stock options to Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen to purchase 49,600, 31,200, 20,600 and 11,000 shares of our common stock, respectively. Each of the stock options were granted at the fair market value of our common stock on the date of grant and vest over a four year period beginning on January 1, 2008, with one quarter of the shares vesting on January 1, 2009 and the remaining shares vesting in equal monthly installments thereafter over a period of three years.

 

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In December 2008, as part of our annual comprehensive review of our executive compensation, our Compensation Committee approved the grant of stock options to Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen to purchase 42,400, 18,600, 13,900 and 6,300 shares of our common stock, respectively. Each of the stock options were granted at the fair market value of our common stock on January 2, 2009 and vest over a four year period beginning on January 1, 2009, with one quarter of the shares vesting on January 1, 2010 and the remaining shares vesting in equal monthly installments thereafter over a period of three years.

Restricted Stock Unit Awards. In April 2008, in connection with our first comprehensive review of our executive compensation as a publicly traded company, our Compensation Committee awarded restricted stock units, or RSUs, to Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen covering 33,100, 20,800, 15,200 and 7,300 shares of our common stock, respectively. Each of the RSUs awarded vests over a three year period beginning on January 1, 2008, with one third of the shares vesting on January 1, 2009 and the remaining shares vesting in equal quarterly installments thereafter over a period of two years, subject to the same accelerated vesting provisions that apply to the stock options held by the applicable executive officer as described under—”Potential Payment Under Employment Arrangements” below.

In December 2008, as part of a comprehensive review of our executive compensation with the assistance of Radford Surveys & Consulting, our Compensation Committee awarded RSUs to Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen covering 21,200, 9,300, 7,000 and 3,200 shares of our common stock, respectively. Each of the RSUs awarded vests over a three year period beginning on January 1, 2009, with one third of the shares vesting on January 1, 2010 and the remaining shares vesting in equal quarterly installments thereafter over a period of two years, subject to the same accelerated vesting provisions that apply to the stock options held by the applicable executive officer as described under—“Potential Payment Under Employment Arrangements” below.

Severance and Change in Control Benefits. Our named executive officers, who are designated below under “—Summary Compensation Table,” are entitled to certain severance and change in control benefits, the terms of which are described below under “—Post Employment Compensation.” The Compensation Committee believes that in order to continue to retain the services of our key executive officers and focus their efforts on stockholder interests when considering strategic alternatives, it is important to provide them with some income and benefit protection against loss of employment in connection with a change-in-control of our company. The Compensation Committee believes that such benefits serve to thereby align the interests of our stockholders and our executive officers. We also provide our executives with partial equity vesting acceleration benefits solely in the event of a change-in-control of our company as a performance incentive. However, we do not provide for cash benefits solely in the event of a change-in-control because we believe that our executives are materially harmed only if a change in control results in our executives’ involuntary loss of employment, reduced responsibilities, reduced compensation, or other adverse change in the nature of the employment relationship.

401(k) Plan. We maintain a defined contribution employee retirement plan, or 401(k) plan, for our employees. Our executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Code. The 401(k) plan provides that each participant may contribute up to the lesser of 100% of his or her pre-tax compensation or the statutory limit for the applicable year. We did not make any discretionary Company contributions to the 401(k) plan during 2008.

Other Compensation. Executive officers are eligible to participate in our employee benefit plans on the same terms as all other full-time employees. These plans include medical, dental, vision and life insurance. We do not provide executive retirement benefits other than our 401(k) plan because we intend that the benefits provided under our 401(k) plan and the benefits provided under our long-term equity incentive awards will provide a significant source of retirement income for our executive officers.

 

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Deductibility of Compensation under Section 162(m). Section 162(m) of the Code limits our deduction for federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is “performance-based compensation.” Our Compensation Committee has not yet established a policy for determining which forms of incentive compensation awarded to our executive officers will be designed to qualify as “performance-based compensation.” To maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, our Compensation Committee has not adopted a policy that requires all compensation to be deductible. However, our Compensation Committee intends to evaluate the effects of the compensation limits of Section 162(m) on any compensation it proposes to grant, and our Compensation Committee intends to provide future compensation in a manner consistent with our best interests and those of our stockholders.

Section 409A—Treatment of Nonqualified Deferred Compensation. Section 409A of the Internal Revenue Code requires that amounts that qualify as “nonqualified deferred compensation” satisfy certain requirements. We intends to administer our executive compensation program and design individual compensation elements, so that they are either exempt from, or satisfy the requirements of, Section 409A. We believe that we are currently operating such plans and arrangements in compliance with Section 409A.

 

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Summary Compensation Table

The following table provides information regarding the compensation earned during the years ended December 31, 2008, 2007 and 2006 by our chief executive officer, chief operating officer, chief financial officer and general counsel, who we collectively refer to as our “named executive officers.”

 

Name and Principal Position

  Year   Salary
($)
  Bonus
($)
  Stock
Awards
($)(1)
  Option
Awards
($)(2)
  Non-Equity
Incentive
Plan
Compensation
($)
  All Other
Compensation
($)
  Total
($)

Tina S. Nova, Ph.D.  

  2008   $ 430,000     —     $ 310,368   $ 315,412   $ 430,000   $ 19,683   $ 1,505,463

President and Chief Executive Officer (3)

  2007     375,229     —       —       123,853     306,260     95,462     900,804
  2006     342,417   $ 120,750     —       69,536     —       9,979     542,682

Samuel D. Riccitelli

  2008     370,000     —       195,035     171,089     222,000     18,688     976,812

Executive Vice President and Chief Operating Officer (4)

  2007     347,617     —       —       50,449     212,792     50,004     660,862
  2006     318,009     105,445     —       28,736     —       16,107     468,297

Douglas A. Schuling

  2008     285,000     —       142,525     129,413     149,625     18,215     724,778

Executive Vice President and Chief Financial Officer (5)

  2007     264,189     —       —       49,562     161,722     49,958     525,431
  2006     241,687     74,728     —       27,307     —       15,953     359,675

Christian V. Kuhlen, M.D., Esq. 

  2008     240,000     —       68,450     98,253     108,000     12,353     527,056

Vice President, General Counsel and Corporate Secretary (6)

  2007     71,253     50,000     —       18,526     —       2,884     142,663
               

 

(1) Represents the restricted stock unit compensation costs for 2008, which were calculated in accordance with SFAS No. 123R using the intrinsic method without consideration of forfeitures. For a discussion of valuation assumptions, see the section entitled “Stock-Based Compensation” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008 and the notes to our consolidated financial statements also included therein.
(2) Represents the stock option compensation costs for 2008, 2007 and 2006, which were calculated in accordance with SFAS No. 123R using the modified prospective transition method without consideration of forfeitures. For a discussion of valuation assumptions, see the section entitled “Stock-Based Compensation” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008 and the notes to our consolidated financial statements also included therein.
(3) Dr. Nova’s salary was increased from $336,000 per year to $350,000 per year effective August 1, 2006, to $364,595 per year effective January 1, 2007, to $382,825 per year effective June 1, 2007, and to $430,000 per year effective January 1, 2008. The bonus amount of $430,000 paid to and earned by Dr. Nova in 2008 covered the period from January 2008 to December 2008. The bonus amounts paid to or earned by Dr. Nova in 2006 include a $84,000 bonus paid in August 2006 covering the period from August 1, 2005 to July 31, 2006, and a $36,750 bonus paid in February 2007 covering the period from August 1, 2006 to December 31, 2006. All other compensation includes: in 2008, $19,683 paid for life insurance, healthcare, dental and vision benefits; in 2007, $84,515 paid in January 2008 related to our October 2007 option repricing and $10,947 paid for life insurance, healthcare, dental and vision benefits; and in 2006, $9,979 paid for healthcare, dental and vision benefits.
(4) Mr. Riccitelli’s salary was increased from $312,283 per year to $324,775 per year effective August 1, 2006, to $337,766 per year effective January 1, 2007, to $354,654 per year effective June 1, 2007, and to $370,000 per year effective January 1, 2008. The bonus amount of $222,000 paid to or earned by Mr. Riccitelli in 2008 covered the period from January 2008 to December 2008. The bonus amounts paid to or earned by Mr. Riccitelli in 2006 include a $68,702 bonus paid in August 2006 covering the period from August 1, 2005 to July 31, 2006, a $6,734 one-time special bonus paid in late 2006 for services in 2006 and a $30,009 bonus paid in February 2007 covering the period from August 1, 2006 to December 31, 2006. All other compensation in 2008 includes $18,688 paid for healthcare, dental and vision benefits; 2007 includes $34,189 paid in January 2008 related to our October 2007 option repricing and $15,815 paid for life insurance, healthcare, dental and vision benefits; and 2006 includes $16,107 paid for healthcare, dental and vision benefits.
(5)

Mr. Schuling’s salary was increased from $237,336 per year to $246,829 per year effective August 1, 2006, to $256,702 per year effective January 1, 2007, to $269,537 per year effective June 1, 2007, and to $285,000 per year effective January 1, 2008. The bonus amount of $149,625 paid to and earned by Mr. Schuling in 2008 covered the period from

 

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January 2008 to December 2008. The bonus amounts paid to or earned by Mr. Schuling in 2006 include a $47,467 bonus paid in August 2006 covering the period from August 1, 2005 to July 31, 2006, a $6,527 one-time special bonus paid in late 2006 for services in 2006 and a $20,734 bonus paid in February 2007 covering the period from August 1, 2006 to December 31, 2006. All other compensation includes: in 2008, $18,215 paid for life insurance, healthcare, dental and vision benefits; in 2007, $34,462 paid in January 2008 related to our October 2007 option repricing and $15,496 paid for life insurance, healthcare, dental and vision benefits; and in 2006, $15,953 paid for healthcare, dental and vision benefits.

(6) Dr. Kuhlen joined us in September 2007 and his annual base salary was increased from $235,000 per year to $240,000 per year effective January 1, 2008. The bonus amount of $108,000 paid to and earned by Dr. Kuhlen in 2008 covered the period from January 2008 to December 2008. The bonus amounts paid to and earned by Dr. Kuhlen in 2007 covered the period from September 2007 to December 31, 2007. All other compensation includes: in 2008, $12,353 paid for life insurance, healthcare, dental and vision benefits, and in 2007, $2,884 paid for life insurance, healthcare, dental and vision benefits.

Post-Employment Compensation

The amount of compensation payable to each named executive officer upon voluntary termination, involuntary termination without cause, termination following a change in control or termination in the event of disability or death of the executive is shown below.

Option Acceleration Under The 2001 Equity Incentive Plan

Under our 2001 EIP, stock options granted to our employees and officers will immediately vest in the event a participant’s service with us or a successor entity is terminated involuntarily without cause or voluntarily with good reason within 13 months following the occurrence of certain specified change in control transactions. In addition, upon the occurrence of a change in control as described in their respective stock option agreements, our executive officers are entitled to immediate accelerated vesting of 50% of their outstanding unvested stock options.

Payments Made Upon Termination

Regardless of the manner in which a named executive officer’s employment terminates, the named executive officer is entitled to receive amounts earned during his or her term of employment, including salary, vested options, vested RSUs and unused vacation pay.

Potential Payment Under Employment Arrangements

In November 2008, we entered into an amended and restated employment agreement with Dr. Nova that is terminable at any time by either party. If we terminate her employment at any time with or without cause, as defined in her employment agreement, she will be entitled to receive any of her unpaid prorated base salary for the actual number of days worked along with all benefits and expense reimbursements to which she is entitled by virtue of her past employment with us. In addition, the agreement provides that if Dr. Nova is terminated without cause prior to a change in control or if she is terminated without cause or she resigns for good reason following a change in control, she will also be entitled to be compensated at her then annual base salary for 18 months from her date of termination or resignation, as applicable, and will receive continued medical, dental and vision benefits for such 18-month period. In addition, if Dr. Nova is terminated without cause prior to a change in control, she will be entitled to an additional 18 months of accelerated vesting of her stock options. As a condition to receiving such benefits, Dr. Nova may not, during such 18-month period, engage in any employment or business activity that is directly competitive with us and may not induce any of our employees to leave their employment with us. Moreover, upon a change in control, the vesting of one half of Dr. Nova’s outstanding unvested stock options will accelerate in full and the vesting of the remaining one half of Dr. Nova’s outstanding unvested stock options will vest in six equal monthly installments over the six-month period following the change of control, subject to acceleration in full of vesting and exercisability if Dr. Nova’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason

 

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within 90 days prior to or within six months after the change in control. All payments to be made to Dr. Nova under her employment agreement are intended to either be exempt from, or satisfy the requirements of, Section 409A of the Internal Revenue Code.

In November 2008, we entered into an amended and restated employment agreement with Mr. Riccitelli that is terminable at any time by either party. If we terminate his employment at any time with or without cause, he will be entitled to receive any unpaid prorated base salary for the actual number of days worked along with all benefits and expense reimbursements to which he is entitled by virtue of his past employment with us. In addition, the agreement provides that if Mr. Riccitelli is terminated without cause prior to a change in control or if he is terminated without cause or he resigns for good reason following a change in control, he will also be entitled to be compensated at his then annual base salary for 12 months from his date of termination or resignation, as applicable, and will receive continued medical, dental and vision benefits for such 12-month period. In addition, if Mr. Riccitelli is terminated without cause prior to a change in control, he will be entitled to an additional 12 months of accelerated vesting of his stock options. As a condition to receiving such benefits, Mr. Riccitelli may not, during such 12-month period, engage in any employment or business activity that is directly competitive with us and may not induce any of our employees to leave their employment with us. Moreover, upon a change in control, the vesting of one half of Mr. Riccitelli’s outstanding unvested stock options will accelerate in full and the vesting of the remaining one half of Mr. Riccitelli’s outstanding unvested stock options will vest in six equal monthly installments over the six-month period following the change of control, subject to acceleration in full of vesting and exercisability if Mr. Riccitelli’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control. All payments to be made to Mr. Riccitelli under his employment agreement are intended to either be exempt from, or satisfy the requirements of, Section 409A of the Internal Revenue Code.

In November 2008, we entered into an amended and restated employment agreement with Mr. Schuling that is terminable at any time by either party. If we terminate his employment at any time with or without cause, he will be entitled to receive any unpaid prorated base salary for the actual number of days worked along with all benefits and expense reimbursements to which he is entitled by virtue of his past employment with us. In addition, the agreement provides that if we terminate Mr. Schuling’s employment without cause prior to a change in control or if he is terminated without cause or he resigns for good reason following a change in control, he will be entitled to be compensated at his then annual base salary for 12 months from his date of termination or resignation, as applicable, and will receive continued medical, dental and vision benefits for such 12-month period. In addition, if Mr. Schuling is terminated without cause prior to a change in control, he will be entitled to an additional 12 months of vesting of his stock options. As a condition to receiving such benefits, Mr. Schuling may not, during such 12-month period, engage in any employment or business activity that is directly competitive with us and may not induce any of our employees to leave their employment with us. Moreover, upon a change in control, the vesting of one half of Mr. Schuling’s outstanding unvested stock options will accelerate in full and the vesting of the remaining one half of Mr. Schuling’s outstanding unvested stock options will vest in six equal monthly installments over the six-month period following the change of control, subject to acceleration in full of vesting and exercisability if Mr. Schuling’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control. All payments to be made to Mr. Schuling under his employment agreement are intended to either be exempt from, or satisfy the requirements of, Section 409A of the Internal Revenue Code.

In December 2008, we entered into an amended and restated employment agreement with Dr. Kuhlen that is terminable at any time by either party. If we terminate his employment at any time with or without cause, he will be entitled to receive any unpaid prorated base salary for the actual number of days worked along with all benefits and expense reimbursements to which he is entitled by virtue of his past employment with us. In addition, the agreement provides that if we terminate Dr. Kuhlen’s employment without cause prior to a change in control or if he is terminated without cause or he resigns for good reason following a change in control, he will

 

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be entitled to be compensated at his then annual base salary for 12 months from his date of termination or resignation, as applicable, and will receive continued medical, dental and vision benefits for such 12-month period. In addition, if Dr. Kuhlen is terminated without cause prior to a change in control, he will be entitled to an additional 12 months of vesting of his stock options. As a condition to receiving such benefits, Dr. Kuhlen may not, during such 12-month period, engage in any employment or business activity that is directly competitive with us and may not induce any of our employees to leave their employment with us. Moreover, upon a change in control, the vesting of one half of Dr. Kuhlen’s outstanding unvested stock options will accelerate in full and the vesting of the remaining one half of Dr. Kuhlen’s outstanding unvested stock options will vest in six equal monthly installments over the six-month period following the change of control, subject to acceleration in full of vesting and exercisability if Dr. Kuhlen’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control. All payments to be made to Dr. Kuhlen under his employment agreement are intended to either be exempt from, or satisfy the requirements of, Section 409A of the Internal Revenue Code.

All RSU awards granted to Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen are granted with the same vesting acceleration provisions applicable to stock options granted to such executive officers that are in effect as of the grant date under their respective employment agreements. At the election of each executive officer, shares of our common stock otherwise issuable upon the vesting of each RSU award may be withheld for purposes of satisfying the applicable withholding taxes.

The following table and summary set forth potential payments payable to our current executive officers upon a change of control or termination of employment without cause or resignation for good reason following a change in control. Our Compensation Committee may in its discretion revise, amend or add to the benefits if it deems advisable. The table below reflects amounts payable to our executive officers based on the employment agreements with the executive officers as described above assuming the change of control occurred on, and their employment was terminated on, December 31, 2008:

 

    Upon Change in Control   Upon Termination Without Cause or Resignation for
Good Reason Following a Change in Control
    Salary   Bonus   Benefits   Stock
Awards
(1)
  Option
Awards
(2)
  Total   Salary
(3)
  Bonus   Benefits   Stock
Awards
(1)(4)
  Option
Awards
(2)(5)
  Total

Tina S. Nova, Ph.D.  

  $ —     $ —     $ —     $ 465,552   $ 792,386   $ 1,257,938   $ 645,000   $ —     $ 29,524   $ 931,103   $ 1,584,773   $ 3,190,400

Samuel D. Riccitelli

    —       —       —       292,552     477,255     769,807     370,000     —       18,651     585,104     954,510     1,928,265

Douglas A. Schuling

    —       —       —       213,788     328,191     541,979     285,000     —       18,215     427,576     656,382     1,387,173

Christian V. Kuhlen, M.D., Esq. 

    —       —       —       102,674     231,138     333,812     240,000     —       12,353     205,349     462,275     919,977

 

(1) Calculated in accordance with SFAS No. 123R using the intrinsic value method without consideration of forfeitures.
(2) Calculated in accordance with SFAS No. 123R using the modified prospective transition method without consideration of forfeitures.
(3) Represents 18 months of continued salary for Dr. Nova and 12 months of continued salary for Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen, each based upon their base salary as of December 31, 2008.
(4) Upon termination without cause prior to a change in control, Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen will receive the same salary and benefits referenced in the chart above and will receive an additional 18 months, in the case of Dr. Nova, or 12 months, in the case of Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen (six months for Dr. Kuhlen’s 2008 RSU grants), of accelerated vesting of their stock awards with values of $750,030, $373,791, $273,170 and $96,964, respectively.
(5) Upon termination without cause prior to a change in control, Dr. Nova, Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen will receive the same salary and benefits referenced in the chart above and will receive an additional 18 months, in the case of Dr. Nova, or 12 months, in the case of Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen, of accelerated vesting of their stock option awards with values of $1,022,678, $469,687, $326,613 and $203,822, respectively.

 

39


Grants of Plan-Based Awards

Prior to 2009, all stock options granted to our named executive officers were incentive stock options, to the extent permissible under the Code. Beginning in 2009, all stock options granted to our named executive officers are nonstatutory stock options. The exercise price per share of each stock option granted to our named executive officers was equal to the fair market value of our common stock as determined in good faith by our Board of Directors on the date of the grant. Stock options were granted under either our 2001 EIP or our 2007 EIP. All RSUs were granted under our 2007 EIP.

The following table sets forth certain information regarding grants of plan-based awards to our named executive officers for 2008:

 

        Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
(1)
  All Other
Stock
Awards:
Number
of Shares
or Units
(#)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise
or Base
Price of
Option
Awards
($/share)
(2)
  Grant
Date
Fair
Value
of Stock
and
Option
Awards
($) (3)

Name

  Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
       

Tina S. Nova, Ph.D. (4)

  —     $ —     $ 215,000   $ 430,000   —     —     $ —     $ —  
  04/10/08         49,600   —       28.13     15.52
  04/10/08         —     33,100     28.13     28.13

Samuel D. Riccitelli (5)

  —       —       148,000     222,000   —     —       —       —  
  04/10/08         31,200   —       28.13     15.52
  04/10/08         —     20,800     28.13     28.13

Douglas A. Schuling (5)

  —       —       99,750     149,625   —     —       —       —  
  04/10/08         20,600   —       28.13     15.52
  04/10/08         —     15,200     28.13     28.13

Christian V. Kuhlen, M.D., Esq. (5)

  —       —       72,000     108,000   —     —       —       —  
  04/10/08         11,000       28.13     15.52
  04/10/08           7,300     28.13     28.13

 

(1) The amounts represent the threshold, target and maximum payments under our 2008 Annual Executive Bonus Plan, as amended. The actual amount earned is disclosed above in the “Summary Compensation Table” under the “Non-Equity Incentive Plan Compensation” column.
(2) Represented the per share fair market value of our common stock, as determined by the closing market price of our common stock as quoted on the NASDAQ Global Market on the grant date.
(3) Calculated in accordance with SFAS No. 123R using the modified prospective transition method without consideration of forfeitures for stock options and using the intrinsic value method without consideration of forfeitures for RSU awards.
(4) Twenty-five percent of the total number of shares subject to Dr. Nova’s stock options vest on the twelve month anniversary of the vesting commencement date of January 1, 2008, with the remainder vesting in equal monthly installments over the following 36 months. One-third of the total number of shares subject to the RSU award vest on the twelve month anniversary of the vesting commencement date of January 1, 2008, with the remainder vesting in equal quarterly installments over the following two years. If Dr. Nova’s employment with us is terminated without cause prior to a change in control, she will be entitled to an additional eighteen months of accelerated vesting of the stock options and RSU awards. In connection with a change in control, 50% of the unvested shares under each of the stock options and RSU awards granted to Dr. Nova will vest in full and the remaining 50% of the unvested shares will vest in six equal monthly installments over the six-month period following such change in control, subject to acceleration in full of vesting and exercisability if her employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control.
(5) Twenty-five percent of the total number of shares subject to stock options vest on the twelve month anniversary of the applicable vesting commencement date of January 1, 2008, with the remainder vesting in equal monthly installments over the following 36 months. One-third of the total number of shares subject to the RSU awards vest on the twelve month anniversary of the vesting commencement date of January 1, 2008, with the remainder vesting in equal quarterly installments over the following two years. If the executive officer’s employment with us is terminated without cause prior to a change in control, he will be entitled to an additional twelve months of accelerated vesting of the stock option. In connection with a change in control, 50% of the unvested shares under each of the stock options granted to this executive officer will vest in full and the remaining 50% of the unvested shares will vest in six equal monthly installments over the six-month period following such change in control, subject to acceleration in full of vesting and exercisability if his employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control.

 

40


Outstanding Equity Awards at December 31, 2008

The following table sets forth certain information regarding outstanding equity awards granted to our named executive officers that remain outstanding as of December 31, 2008. For the option awards that are exercisable prior to being fully vested, if exercised, they are subject to a lapsing right of repurchase until the options are fully vested. This repurchase right permits us to repurchase any unvested shares from the applicable named executive officer at the exercise price paid by such named executive officer for the repurchased shares.

 

    Option Awards   Stock Awards

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
  Option
Exercise
Price
($)
    Option
Expiration
Date
(1)
  Number of
Units of
Stock
That Have
Not Vested
(#)
    Market
Value of
Units of
Stock
That Have
Not
Vested
($)

Tina S. Nova, Ph.D. (1)

  1,624   —     —     $ 9.50     01/14/11    
  3,830   —     —       14.25     02/20/12    
  17,682   —     —       0.38     10/22/13    
  42,813   —     —       0.38     10/22/13    
  9,176   —     —       0.38     10/22/13    
  130,429   —     —       0.38     05/25/14    
  227,988   —     37,998     0.38     08/18/15    
  39,302   —     25,750     1.24 (3)   07/16/16    
  —     49,600   49,600     28.13     04/10/18    
            33,100 (4)   1,128,048

Samuel D. Riccitelli (2)

  2,368   —     —     $ 14.25     11/13/11    
  263   —     —       14.25     11/20/12    
  20,247   —     —       0.38     10/22/13    
  6,938   —     —       0.38     10/22/13    
  60,447   —     —       0.38     05/25/14    
  104,250   —     17,375     0.38     08/18/15    
  15,899   —     10,416     1.24 (3)   07/16/16    
  —     31,200   31,200     28.13     04/10/18    
            20,800 (4)   708,864

Douglas A. Schuling (2)

  789   —     —     $ 9.50     04/14/09    
  1,562   —     —       9.50     01/14/11    
  1,196   —     —       14.25     08/29/11    
  20,812   —     —       0.38     10/22/13    
  10,981   —     —       0.38     01/14/11    
  31,554   —     —       0.38     08/29/11    
  10,526   —     —       0.38     05/25/14    
  69,561   —     11,594     0.38     08/18/15    
  16,026   —     10,500     1.24 (3)   07/16/16    
  —     20,600   20,600     28.13     04/10/18    
            15,200 (4)   518,016

Christian V. Kuhlen, M.D., Esq. (2)

  6,578   14,474   14,474     9.03     09/11/17    
  —     11,000   11,000     28.13     04/10/18    
            7,300 (4)   248,784

 

(1)

Twenty-five percent of the total number of shares subject to Dr. Nova’s stock options vest on the twelve month anniversary of the applicable grant date or vesting commencement date of January 1, 2008 with the remainder vesting in equal monthly installments over the following 36 months. If Dr. Nova’s employment with us is terminated due to an involuntary termination without cause or due to a voluntary termination with good reason, Dr. Nova will be entitled to an additional eighteen months of accelerated vesting of the stock options. In connection with a change in control, 50% of

 

41


 

the unvested shares under each of the stock options granted to Dr. Nova will vest in full and the remaining 50% of the unvested shares will vest in six equal monthly installments over the six-month period following such change in control, subject to acceleration in full of vesting and exercisability if Dr. Nova’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control.

(2) Twenty-five percent of the total number of shares subject to the executive officer’s stock options vest on the twelve month anniversary of the applicable vesting commencement date (January 1, 2008) with the remainder vesting in equal monthly installments over the following 36 months. If the executive officer’s employment with us is terminated due to an involuntary termination without cause or due to a voluntary termination with good reason, the executive officer will be entitled to an additional twelve months of accelerated vesting of the stock options. In connection with a change in control, 50% of the unvested shares under each of the stock options granted to the executive officer will vest in full and the remaining 50% of the unvested shares will vest in six equal monthly installments over the six-month period following such change in control, subject to acceleration in full of vesting and exercisability if the executive officer’s employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason within 90 days prior to or within six months after the change in control.
(3) In October 2007, each of these stock option awards was amended to increase the exercise price per share from $0.38 to $1.24. Additional information with respect to the amendments to these stock option awards is included below under “Option Repricings.”
(4) Represent RSU awards where one-third of the total number of shares vest on the twelve month anniversary of the vesting commencement date of January 1, 2008 with the remainder vesting in equal quarterly installments over the following two years. The RSU award held by Dr. Nova is subject to the same vesting acceleration provisions described in footnote (1). The RSU awards held by Mr. Riccitelli, Mr. Schuling and Dr. Kuhlen are subject to the same vesting acceleration provisions described in footnote (2), except that the RSU awards granted to Dr. Kuhlen in 2008 provide for six months of accelerated vesting in the event his employment with us terminates due to an involuntary termination without cause or due to a voluntary termination with good reason.

Option Exercises and Stock Vested

The following table sets forth certain information regarding outstanding option and stock awards granted to our named executive officers that were exercised or issued as of December 31, 2008.

 

    Option Awards   Stock Awards

Name

  Number of Shares
Acquired on Exercise
(#)
  Value Realized on
Exercise
($)
  Number of Shares
Acquired on Vesting
(#)
  Value Realized on
Vesting
($)

Tina S. Nova, Ph.D.  

  91,793   2,345,311   —     —  
  25,749   657,887   —     —  

Samuel D. Riccitelli

  42,188   1,077,903   —     —  
  10,416   266,129   —     —  

Douglas A. Schuling

  30,210   771,866   —     —  
  10,500   268,275   —     —  

Christian V. Kuhlen, M.D., Esq.  

  —     —     —     —  

Pension Benefits

None of our named executive officers participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us. Our Compensation Committee may elect to adopt qualified or non-qualified benefit plans in the future if it determines that doing so is in our best interests.

Nonqualified Deferred Compensation

None of our named executive officers participate in or have account balances in nonqualified defined contribution plans or other nonqualified deferred compensation plans maintained by us. Our Compensation Committee may elect to provide our officers and other employees with non-qualified defined contribution or other nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.

 

42


TRANSACTIONS WITH RELATED PERSONS

Related-Person Transactions Policy and Procedures

We have adopted a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of “related-persons transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A related person is any executive officer, director or a holder of more than 5% of our common stock, including any of their immediate family members and any entity owned or controlled by such persons.

Each director and executive officer is responsible for identifying to our management any related-person transaction, and we shall request each record or beneficial owner of more than 5% of any class of our voting securities to identify and report any related-person transaction. Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to the Audit Committee (or, where review by our Audit Committee would be inappropriate, to another independent body of our Board of Directors) for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, our Audit Committee takes into account the relevant available facts and circumstances including, but not limited to:

 

   

the risks, costs and benefits to us;

 

   

the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

 

   

the terms of the transaction;

 

   

the availability of other sources for comparable services or products; and

 

   

the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.

In the event a director has an interest in the proposed transaction, the director must recuse himself or herself form the deliberations and approval. Our policy requires that, in reviewing a related-person transaction, our Audit Committee must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and that of our stockholders, as our Audit Committee determines in the good faith exercise of its discretion. We did not previously have a formal policy concerning transactions with related persons.

We have entered into indemnity agreements with certain officers and directors which provide, among other things, that the Company will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of ours, and otherwise to the fullest extent permitted under Delaware law and our Bylaws.

Amendment of Celula Agreement

In June 2005, we executed an Asset Purchase Agreement with Celula, Inc. whereby we sold certain tangible and intangible assets associated with our cellular analysis technology to Celula. The agreement provided for $425,000 in initial milestone-based cash payments and future royalty based compensation tied to net sales of

 

43


products and services that make use of valid and outstanding patents or patent applications sold to Celula. In December 2008, we entered into an amendment of our agreement with Celula to provide for a restructuring of the milestone payments and a definitive timeline for repayment. Andrew E. Senyei, M.D., the Chairman of our board of directors, is also a member of the board of directors of Celula. Dr. Senyei recused himself from our and our board of directors’ negotiations and approval of the terms of the amendment with Celula. The terms and conditions of the amendment were negotiated by a special committee of our board of directors that excluded Dr. Senyei. The amendment was approved by our Audit Committee in accordance with the procedures of our Related-Person Transactions policy and by the disinterested members of our board of directors.

Sales of Securities

Certain of our former principal stockholders, directors and named executive officers sold an aggregate of 2,140,164 shares of our common stock in March 2008 in connection with the closing of a secondary offering of our common stock at a price of $25.50 per share, as set forth below:

 

Principal Stockholder, Officer or Director

   Shares sold in
secondary (#)

Enterprise Partners V, L.P.  

   737,170

Chicago Growth Partners, LP

   240,961

William Blair Capital Partners VII QP, L.P. and its affiliates

   240,961

Alliance Technology Ventures III, L.P. and its affiliate

   463,739

Tullis-Dickerson Capital Focus II, L.P. and its affiliates

   241,099

Thomas A. Waltz, M.D.  

   4,666

Tina S. Nova, Ph.D.  

   118,212

Samuel D. Riccitelli

   52,604

Douglas A. Schuling

   40,752
    

Total:

   2,140,164
    

Pursuant to our amended and restated investor rights agreement, we paid all expenses, other than underwriting discounts and commissions, related to the March 2008 secondary offering of our common stock, including expenses of one counsel to the selling stockholders in the transaction up to a maximum of $25,000.

Some of our directors and a former director who served in 2008 are associated with our former principal stockholders who sold shares in our March 2008 secondary offering as indicated in the table below:

 

Director

      

Principal Stockholder

Andrew E. Senyei, M.D.  

     Enterprise Partners V, L.P.

Timothy M. Buono

     Tullis-Dickerson Capital Focus II, L.P. and its affiliates

Michael Henos

     Alliance Technology Ventures III, L.P. and its affiliates

Robert E. Curry, Ph.D.  

     Alliance Technology Ventures III, L.P. and its affiliates

Former Director

        

Arda M. Minocherhomjee, Ph.D.  

     Chicago Growth Partners, LP and William Blair Capital Partners VII QP, L.P. and its affiliates

Employment Agreements

We have entered into employment arrangements with our executive officers, as more fully described under—“Post Employment Compensation—Potential Payment Under Employment Arrangements.”

 

44


Stock Options and RSU Awards Granted to Executive Officers and Directors

We have granted stock options and RSU awards to our executive officers and directors, as more fully described under—“Non-Employee Director Compensation” and “Executive Compensation” above.

Indemnification Agreements

We have entered into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are Genoptix stockholders will be “householding” the Company’s proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify your broker. Direct your written request to Genoptix, Inc., Marcy Graham, Senior Director, Investor Relations at 1811 Aston Avenue, Carlsbad, CA 92008 or contact Ms. Graham at 760-930-7150. Stockholders who currently receive multiple copies of the Notices of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers.

 

45


OTHER MATTERS

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

 

By Order of the Board of Directors
LOGO
Christian V. Kuhlen, M.D., Esq.
Corporate Secretary

April 21, 2009

A copy of the Company’s Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2008 is available without charge upon written request to: Investor Relations, Genoptix, Inc., 1811 Aston Avenue, Carlsbad, CA 92008.

 

46


Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

M11260        

 

   

 

 

GENOPTIX, INC.

ANNUAL MEETING OF STOCKHOLDERS – JUNE 2, 2009

 

The undersigned hereby appoints Douglas A. Schuling and Christian V. Kuhlen, M.D., Esq., and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of Genoptix, Inc. which the undersigned may be entitled to vote at the 2009 Annual Meeting of Stockholders of Genoptix, Inc. to be held on June 2, 2009 at 9:00 a.m. local time at the facilities of Genoptix, Inc. located at 2110 Rutherford Road, Carlsbad, CA 92008 and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the matters listed on the reverse side, and in accordance with the instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.

 

 

    
             
   
             
             
                   


 

GENOPTIX, INC.

1811 ASTON AVE

CARLSBAD, CA 92008

  

VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

 

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

 

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 

 

 

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

     
   M11259                 KEEP THIS PORTION FOR YOUR RECORDS

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DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

 

GENOPTIX, INC.

 

The Board of Directors recommends you vote “FOR” Proposals 1 and 2.

      For All    Withhold All    For All Except        

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

                             
                                     

 

Vote on Directors

   

¨

   ¨    ¨      

 

                     

1.     Election of two class II directors to hold office

        until the 2012 Annual Meeting of Stockholders

                                   

        Nominees:

        01)    Laurence R. McCarthy, Ph.D.

        02)    Christine A. White, M.D.

                                   

 

Vote on Proposal

                            
        For       Against    Abstain     

2.      To ratify the selection by the Audit Committee of our Board of Directors of Ernst & Young LLP as our independent

          auditors for the fiscal year ending December 31, 2009.

      ¨       ¨    ¨     
   

NOTE. Such other business as may properly come before the meeting or any adjournment thereof.

                   
                                        
   
                           
                                     
                                        
                                        
                                        
                                     
                                     
           
                             
    

Signature [PLEASE SIGN WITHIN BOX]

 

  

Date

 

       

Signature (Joint Owners)

 

  

Date

 

    
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